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$3.8 billion approved for Koniambo

$3.8 billion approved for Koniambo Xstrata Nickel’s ambitious plans to move up in the ranks of the world’s nickel producers took two giant steps forward in October.

$3.8 billion approved for Koniambo

Xstrata Nickel’s ambitious plans to move up in the ranks of the world’s nickel producers took two giant steps forward in October.  The company approved the development of the Koniambo project, a major long-life, low cost, open pit nickel mine in New Caledonia and announced a deal to buy Jubilee Mines, an Australian nickel producer.

Koniambo will require an investment of $3.8 billion, which will be majority-funded by Xstrata in return for a proportionate share of the project’s cash flows in the first 25 years of operation.

Xstrata owns a 49 per cent stake in Koniambo Nickel SAS (KNS) with the remaining 51per cent held by New Caledonian joint venture partner Société Minière du Sud Pacifique (SMSP).  Xstrata will lead the project implementation and development and has the right to appoint the president of KNS.

The project will be funded through Xstrata’s internal cash reserves and ongoing strong cash flows from operations.

Koniambo will be among the world’s lowest cost producers of nickel with initial annual production of 60,000 tonnes of nickel in ferronickel per annum and substantial further high-return, brownfield expansion potential.  First ore is expected to be processed in the first half of 2011, ramping up to steady state production in 2013.


Koniambo benefits from a world-class resource base, providing a mine life in excess of 25 years from 62.5 million tonnes of saprolite reserves grading 2.40% nickel at a 2.0% cut-off grade.  This major resource also has the potential to extend mine life to well in excess of 50 years of economic production. The resource base currently comprises 142.1 million tonnes of measured and indicated saprolite resources at 2.13% nickel at a 1.5% nickel cut-off grade, 140.7 million tonnes of inferred saprolite resource, grading 2.16% nickel (1.5% cut-off) and 104 million tonnes of inferred limonite resources at 1.5% nickel (1.2% cut-off).

Nickel will be produced using Xstrata Nickel’s Nickel Smelting Technology which integrates calcining, reduction and smelting unit operations from the mineral processing industry with dust containment and counter-current gas flow technologies from the cement industry.  The benefits associated with this technology include higher metallurgical recoveries, improved dust containment and lower operating costs than conventional ferronickel operations.

The decision to approve the Koniambo project comes after a one-year renewal phase, during which Xstrata Nickel and its partners undertook extensive work to optimize the scope, design and financing of the project.  This renewal phase enabled the four major risks associated with the project to be closely defined: execution risk; project stability; socio-political risks and environmental risks.  Comprehensive mitigation strategies have been put in place to address each of these risk areas, including the development of a robust execution plan, a modular approach to engineering and construction, an innovative procurement strategy, comprehensive stakeholder consultation and environmental planning.

“Koniambo is the most attractive undeveloped nickel resource in the world and will be a cornerstone asset for the future growth of our nickel business,” commented Ian Pearce, Xstrata Nickel Chief Executive. “The project will leverage Xstrata Nickel’s strong project development and metallurgical skills, using proven, low-cost nickel smelting technology and benefiting from the thorough analysis undertaken during the project renewal phase.  The decision to proceed with this project underlines our confidence in the outlook for nickel.

“Koniambo enjoys strong support from the New Caledonian and French authorities and from local communities.

Together with our partners, we are excited about the project’s potential to deliver value to stakeholders in New Caledonia and to Xstrata’s shareholders over very many years.”

Jubilee purchase

The price tag agreed to for the friendly takeover of Julilee Mines is US $3.1 billion.

Jubilee owns and operates the world-class Cosmos Nickel Project in the Mt Keith-Leinster region of Western Australia, 40 kilometres north of Leinster, and has recently announced formal approval to proceed with the development of its wholly owned Sinclair Nickel Project 100 kilometres to the south. The Cosmos Nickel Project is located in the heart of one of Australia’s most prospective and historically productive nickel sulphide regions.

To date, Jubilee has discovered eight high-grade massive nickel sulphide deposits within the vicinity of the Cosmos Nickel Project.

Jubilee’s emerging Sinclair project is evolving as a substantial new production centre, with the company recently announcing formal approval to proceed with a new A$90 million standalone mine and processing facility.

The company sees high-grade production of nickel-in-concentrate increasing from 12,000 tonnes in 2007/08 to 22,000 tonnes in 2010/11 and 30,000 tonnes per year thereafter.