The owners of the Ambatovy nickel and cobalt mine in Madagascar will likely reach an agreement in the next few weeks on a plan to restructure the project, Sherritt International chairperson and CEO Ian Delaney said on Wednesday.
Sherritt owns 40% and partners Sumitomo and Korea Resources each have stake of 27.5% stake in the mine, which is currently designed to produce 60,000 tonnes a year of nickel and 5,600 tonnes a year of cobalt over 27 years.
However, Delaney indicated that the capital cost of the project was likely to exceed the last estimate of $3.4 billion, and warned that the company would, and could, not finance anything “much in excess” of the approved capital budget.
He said he would not consider tapping into the group's cash reserves to fund cost overruns.
"'I am not going to bet this company's balance sheet on the required metal prices to amortise this project," he said on a conference call with analysts and investors. An updated cost figure would be available once an agreement is reached on restructuring the project.
The Ambatovy project was initially expected to start producing as early as 2010, but Sherritt CEO Jowdat Waheed, who stepped down earlier this week to deal with a family health matter and has been replaced by Delaney, indicated in October that it would likely be delayed.
The company acquired its stake in the large laterite project when it bought Dynatec Corp in 2007.
Nickel prices and rising input costs have had a negative impact on the economics of the project and Sherritt said in November last year that it was looking for ways to renegotiate contracts for construction materials, freight and labour indicating that the partners would also defer some capital spending, and would study changing the construction methods.
Source: Mining Weekly
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