China’s Jinchuan goes after Crowflight’s nickel

Crowflight Minerals (CML-T) rose 23.5% or 4¢ to 21¢ per share on news that China’s Jinchuan Group is offering $150 million in cash to acquire the junior nickel miner.

Jinchuan, China’s largest producer of nickel, cobalt and platinum, is after Crowflight’s Bucko Lake nickel mine in the Canadian province of Manitoba. Jinchuan is the world’s fourth-largest nickel producer and its second-largest cobalt producer.

The offer values Crowflight at about 26¢ a share, based on current shares outstanding, and represents a 47.3% premium over the junior’s closing share price on Apr. 2. and a 56.8% premium to the company’s 20-day volume weighted average trading price.

The offer is premised on Jinchuan obtaining 100% of the output from the Bucko Lake mine and any other Crowflight exploration properties that are subsequently put into production, Crowflight said.

The Bucko Lake mine near Wabowden is 105 km southwest of Thompson. Wabowden is 4 km from the main provincial highway 6, which connects Winnipeg in southern Manitoba to Thompson in Northern Manitoba.

Bucko’s life-of-mine mineral reserves at a cut-off grade of 1.4% nickel are estimated to be 2.39 million tonnes grading 1.84% nickel and 0.14% copper, according to a technical report dated Mar. 30, 2007.

Bucko Lake started commercial production in June 2009 but mining and milling was temporarily suspended in November to complete ramp development, accelerate mine development and upgrade the backfill plant. Milling and shipments of nickel concentrate resumed on Mar. 10.

Last year the mine produced about 1.38 million 382,000 pounds of nickel and sold 1.15 million pounds of payable nickel.

Crowflight’s production targets for Bucko this year are about 8.6 million pounds of payable nickel based on projections of 342,000 tonnes at a 1.63% nickel grade and assuming a 78% recovery.

Average operating cash costs for the full year are forecast to range from US$5.70-$5.90 per lb. payable nickel as a result of lower tonnages in the first half of 2010 as the mine resumes production.

Capital requirements for 2010 are anticipated to come in at about $14 million for continued development, upgrading the backfill plant and increasing the tailings pond capacity.

So far the company has completed a ramp connecting the surface to the 1,000-ft level; the ramp is designed develop access to new areas for mining and allow for large 40-tonne class trucks to haul ore directly from the stoping levels to surface.

Currently the mine is ramping up to achieve the second quarter target of 1,000 tonnes per day of ore, which should increase to 1,200 tonnes per day in the second half of 2010.

In addition to Bucko, the junior nickel producer also holds nickel, copper and platinum group mineral projects in the Thompson nickel belt and the Sudbury Basin.

Crowflight’s board is reviewing the offer, which is based on Jinchuan getting 100% of the nickel offtake from Bucko Lake and any of the metal that comes out of the ground at its exploration properties.

Switzerland’s Pala Investment Holdings owns 26% of Crowflight.