LionOre earnings drop on weather woes

Vancouver — Despite a strong operating performance in Australia, LionOre Mining International (LIM-T) had its first-quarter earnings dampened by abnormally heavy rains at the Tati nickel operations in Botswana.

The Toronto-based company earned US$25 million on revenue of US$105.5 million in the first three months of 2005, compared with a US$31.4-million profit on revenue of US$94.2 million a year earlier.

Attributable nickel production in the quarter was 5,891 tonnes at a cash cost of US$3.28 per lb., compared with 5,050 tonnes at US$2.36 per lb. a year earlier.

LionOre’s Australian nickel production comes from the Lake Johnston and 80%-owned Black Swan operations. Lake Johnston produced 3,030 tonnes of payable nickel at a cash cost of US$2.45 per lb. in the recent quarter, while Black Swan produced 1,622 tonnes at US$4.35 per lb.

LionOre also operates the Thunderbox gold mine in Australia, which produced 41,812 oz. at a cash cost of US$284 per oz. in the latest quarter, compared with 39,193 oz. at US$248 per oz. a year earlier.

Also in Australia, LionOre has advanced the Maggie Hays nickel deposit to the feasibility stage. Mining would focus on a large, low-grade disseminated sulphide body, as well as a smaller, massive sulphide deposit. Exploration results are expected later this year.

At the 85%-owned Tati nickel operations in Botswana, heavy rains in late 2004 and early 2005 rendered portions of the pit inaccessible and triggered a revised mining plan that reduced production of payable nickel to about 1,800 tonnes. Cash costs averaged US$3.99 per lb., compared with US$2.36 in the first quarter of 2004.

LionOre estimates that production at the 85%-owned Tati complex will remain lower than planned for the next two quarters, until operations stabilize. Despite the reduced production for 2005 (estimated at 10,500 tonnes), the revised mine plan is expected to enhance operations by year-end and beyond.

LionOre first invested in nickel in 1996, when prices averaged US$3.39 per lb. and its market capitalization was $100 million. The company has since grown into one the world’s top 10 nickel producers, while its market capitalization has jumped to $1.5 billion.

In the coming months, the company expects to close the proposed acquisition of a half-interest in the Nkomati nickel mine in South Africa. Late last year, it picked up an 80% share in Honeymoon Well in western Australia, which, at about 1 million tonnes of contained metal, is among the world’s largest undeveloped nickel sulphide deposits.

Together these acquisitions will boost LionOre’s nickel resources by 200% to 1.8 million tonnes of contained nickel and provide a 60% increase in short-term nickel production.

LionOre is also advancing Activox, its proprietary hydrometallurgy technology for nickel and copper. A demonstration plant in Botswana was recently commissioned toward this end.

The plant will operate for the rest of this year. So far, it has produced about 30 tonnes of nickel and copper deliverable to the London Metal Exchange, which is beyond what the company expected.