Search Results for "South Africa"

Norilsk Nickel Sees Drop in Production in South Africa

Mining Weekly reported MMC Norilsk Nickel (LSE:MNOD) has announced significant nickel production increases in its Southern African operations during the second quarter of this year.

As quoted in the market news:

Tati Nickel’s second-quarter output of 2 805 t of nickel in concentrate was a 7% improvement over its production in the first quarter, which came to 2 632 t. Production for the first half of this year was 5 438 t, which was also a 7% rise over the figure for the first half of last year, which was 5 071 t. In a press release, Norilsk attributed this success “to stable performance of the enrichment plant and optimisation of reagent flows in the flotation process”.

Click here to read the full Mining Weekly report.


Uru Metals Discovers Nickel In South Africa

Mining Weekly reported Uru Metals’ (LSE:URU) Zebediela nickel project may become one of the largest nickel mines in the world.

As quoted in the market news:

A prefeasibilty study will be conducted during the next 18 to 24 months at the Zebediela joint venture (JV) project near the platinum mining town of Mokopane, in Limpopo. The study has the potential to increase Zebediela’s projected revenue from the recently completed preliminary economic assessment (PEA) by up to 25% before year-end, he reveals.

Click here to read the full Mining Weekly report.


Nickel Exploration In South Africa Takes Off

Mining Weekly reported nickel exploration and discovery in South Africa is causing a stir of excitement on the Bushveld complex.

As quoted in the market news:

The exploration joint venture (JV) that made the find in 18 months had to outlay only $4.2-million to hit a $1-billion-plus jackpot.

The Africa-focused Aim-quoted URU Metals says that it has a compliant preliminary economic assessment (PEA) from consultants led by the MSA group. The PEA shows the Zebediela project to have a potential of 56-million pounds of nickel a year for 25 years.

Click here to read the full Mining Weekly report.


Norilsk Plans to Increase Australian, South African Nickel Production

Bloomberg reported Norilsk Nickel (LSE:MNOD) wants to curb its dependence on Russia for nickel and is expanding its production in South Africa and Australia.

As quoted in the market news:

Norilsk intends to raise production at its South African Nkomati project by 58 percent this year from 5,815 metric tons last year, while output at Australia’s Lake Johnston mine may jump fivefold to 8,400 tons, Roman Panov, the head of Norilsk’s overseas operations, said today in a statement.

Click here to read the full Bloomberg report.


South African ARM Financial Year earnings down

On Monday, South African diversified miner African Rainbow Minerals (JNB:ARIM) reported a 26 percent drop in full-year headline earnings, hit by a strong rand and lower prices for iron ore and manganese.

The press release is quoted as saying:

ARM, which has interests in nickel, coal, iron ore, platinum, chrome and manganese, said headline earnings per share for the full year fell to 807 cents from 1,094 cents the previous period. During the year, ARM completed the expansion of its Khumani iron ore mine to 10 million tonnes per year, commissioned a 375,000 tonnes per month plant at the Nkomati nickel operations, and its Goedgevonden coal mine is ramping up to its name plate capacity of saleable 6.7 million tonnes per year.

Click here to access the entire press release


NWT Uranium Corp’s 34% Owned Niger Uranium Announces Joint Venture Agreement With Southern African Nickel Limited

NWT Uranium Corp. (TSXV:NWT) congratulated Niger Uranium Limited on its Joint Venture Agreement with SAN, the joint owner and current developer of a portfolio of large nickel projects in Southern Africa.

The press release is quoted as saying:

Niger Uranium believes that the Joint Venture’s nickel projects have potential to host large low-grade, economic, open-pittable sulphide-nickel mineralization, with the flagship target being the Burgersfort nickel project in the Mpumalanga province of South Africa.

Click here to access the entire press release

Click here to access NWT Uranium Corp. Corporate Site


Norilsk Announces Nickel Concentrate Output for 2011 from African Mines

Mining Weekly reported Norilsk Nickel (LSE:MNOD) says it mined 15 161 t of nickel in concentrate at its African operations last year.

As quoted in the market news:

Norilsk Nickel Africa comprises two operations. These are Tati Nickel, in Botswana, which is 85%-owned by the Russian group (the remaining 15% being held by the Botswana government) and Nkomati Nickel, in South Africa, which is a 50:50 joint venture with South Africa’s African Rainbow Minerals (ARM). Management control of Nkomati is vested in ARM.

Click here to read the full Mining Weekly report.


Mine-Building Enters New Phase With Start of Permanent Sinking Work on First Shaft at Ivanhoe Mines’ Platreef PGM, Nickel, Copper and Gold Project

MOKOPANE, SOUTH AFRICA–(Marketwired – July 14, 2016) - Robert Friedland, Executive Chairman of Ivanhoe Mines (TSX:IVN), and Lars-Eric Johansson, Chief Executive Officer, announced today that permanent sinking work has begun on Shaft 1 at the Platreef platinum-group metals, nickel, copper and gold mine in South Africa.

Shaft 1, which will have an internal diameter of 7.25 metres, will provide initial access for early underground development at the Flatreef Deposit and will be utilized to fast-track production during the first phase of the project.

Following the successful commissioning and licensing of the required equipment, the permanent sinking phase started at a planned, initial rate of 1.8 metres per day. This is planned to double the current depth of Shaft 1 from 54 metres to 107 metres below surface – the point at which the main sinking phase will begin. Ivanhoe expects that the subsequent main sinking phase will advance at an average rate of 2.7 metres a day until it reaches the planned, final depth at 1,025 metres below surface in 2018.

“This is an important milestone in the building of a major, new underground mine at Platreef and we are extremely proud of our employees and contractors for the safe and efficient job they have done in transitioning Shaft 1 from the pre-sinking phase to the permanent-sinking phase,” said Mr. Friedland.

Photo 1 is available at the following address: http://media3.marketwire.com/docs/Platreef_Shaft1.pdf

The Shaft sinking contract, held by Aveng Mining, of South Africa, will include the development of two main stations at below-surface depths of 450 metres and 750 metres. Shaft 1 is expected to reach the Flatreef Deposit, at a depth of 777 metres, during the third quarter of 2017.

The selected mining areas proposed in Platreef’s current pre-feasibility study mine plan occur at depths ranging from approximately 700 metres to 1,200 metres below the surface.

The Platreef Project is a Tier One discovery by Ivanhoe Mines’ geologists on the Northern Limb of South Africa’s Bushveld Igneous Complex, the world’s premier platinum producing region.

Ivanhoe Mines owns 64% of the Platreef Project through its subsidiary, Ivanplats, and is directing all mine development work. The South African beneficiaries of the approved broad-based, black economic empowerment structure have a 26% stake in the Platreef Project and the remaining 10% is owned by a Japanese consortium of ITOCHU Corporation; ITC Platinum Development Ltd., an ITOCHU affiliate; Japan Oil, Gas and Metals National Corporation; and JGC Corporation.

Shaft 1, including initial lateral underground development work, will be funded from dedicated funds remaining in Ivanhoe’s treasury from the US$280-million received in 2011 for the sale of an 8% interest in the Platreef Project to the ITOCHU-led Japanese consortium.

Early works for the 10-metre-diameter Shaft 2, the main production shaft with the capacity to hoist six million tonnes per year, are planned to begin next year. The headgear design has been completed by South Africa-based Murray & Roberts Cementation.

Photo 2 is available at the following address: http://media3.marketwire.com/docs/Bottom_Shaft1.pdf

New lines to supply electrical power from South Africa’s national grid

Work now is complete on the internal electricity substation, which will have a capacity of five-million volt-amperes. Construction is underway of the power transmission lines from the main lines of Eskom, the South African public electricity utility, which will be used for shaft sinking. Back-up generators also have been installed to ensure continuous sinking operations in the event of power interruptions.

The new power transmission lines also will provide electric power to an adjacent community near the Platreef Project, which currently has no supply of electricity.

Other on-site work includes the construction of the permanent road intersection leading to the Platreef Project from the N11 national highway, which will assist with management of safe access to the mine.

Feasibility study update

Ivanplats plans to develop the Platreef Mine in three phases: an initial annual rate of four million tonnes per annum (Mtpa) to establish an operating platform to support future expansions; followed by a doubling of production to eight Mtpa; and then a third expansion phase to a steady-state 12 Mtpa. At a projected production rate of 12 Mtpa, Platreef would be among the largest platinum-group metals mines in the world.

Good progress is being made in advancing the feasibility study for Platreef’s first-phase production scenario toward completion. The study, which began in August 2015, is being managed by principal consultant DRA Global, with specialized sub-consultants including Stantec Consulting, Murray & Roberts Cementation, SRK, Golder Associates and Digby Wells Environmental.

Ivanplats completed a pre-feasibility study (PFS) in January 2015 that covered the first phase of development that includes construction of a state-of-the-art underground mine, concentrator and other associated infrastructure to support initial concentrate production.

The development scenarios describe a staged approach structured to provide opportunities to expand the operation based on demand, smelting and refining capacity and capital availability. As the first phase of development is placed into production, there is expected to be an opportunity to modify and optimize the subsequent phases, allowing for changes to the timing of capacity expansions to suit market conditions.

The planned mining methods will use highly productive mechanization, including long-hole stoping and drift-and-fill mining. The mined-out areas within the deposit will be backfilled with a paste mixture that utilizes tailings from the process plant and cement. The ore will be hauled from the stopes to a series of ore passes that will connect to a main haulage level connected to Shaft 2, where it will be hoisted to the surface for processing.

Photo 3 is available at the following address: http://media3.marketwire.com/docs/Platreef_mine_site.pdf

Safety Achievements

The Platreef Project reached a total of 5,903,038 million hours in terms of the Mines Health and Safety Act and the Occupational Health and Safety Act by the end of June 2016. A total of 1,266,480 Lost Time Injury-Free (LTI) hours worked have been achieved since the previous LTI in October 2015. The Platreef Project continues to strive toward its workplace objective of an environment that causes zero harm to any employees, contractors, sub-contractors and consultants.

Photo 4 is available at the following address: http://media3.marketwire.com/docs/Ivanplat_Staff_Aveng_Employees.pdf

Qualified person

The scientific and technical information in this news release has been reviewed and approved by Stephen Torr, P.Geo., Ivanhoe Mines’ Vice President, Project Geology and Evaluation, a Qualified Person under the terms of National Instrument 43-101 (NI 43-101). Mr. Torr has verified the technical data disclosed in this news release.

Information on sample preparation, analyses and security is contained in the Platreef Project NI 43-101 Technical Report dated January 8, 2015, filed on SEDAR at www.sedar.com and on the Ivanhoe Mines website at www.ivanhoemines.com.

About Ivanhoe Mines

Ivanhoe Mines is advancing and developing its three principal projects:

  • The Kamoa Copper Discovery in a previously unknown extension of the Central African Copperbelt in the Democratic Republic of the Congo (DRC).
  • The Platreef Discovery of platinum, palladium, nickel, copper, gold and rhodium on the Northern Limb of the Bushveld Complex in South Africa.
  • The historic, high-grade Kipushi zinc-copper mine, also on the Copperbelt in the DRC.

Statements in this news release that are forward-looking statements or information are subject to various risks and uncertainties concerning the specific factors disclosed here and elsewhere in the company’s periodic filings with Canadian securities regulators. When used in this news release, the words such as “could,” “plan,” “estimate,” “expect,” “intend,” “may,” “potential,” “should” and similar expressions, are forward-looking statements. Information provided in this document is necessarily summarized and may not contain all available material information.

The forward-looking information and statements in this news release include, but is not limited to, (i) statements regarding Shaft 1 providing initial access for early underground development at the Flatreef Deposit and that Shaft 1 will be utilized to fast-track production during the first phase of the project; (ii) statements regarding the sinking of Shaft 1, including at a daily rate of approximately 1.8 metres per day and 2.7 metres per day; statements regarding Shaft 1 reaching the Flatreef Deposit, at a depth of 777 metres, during the third quarter of 2017, and reaching the planned, final depth at 1,025 metres below surface in 2018; statements regarding the expectation that Shaft 1, including some initial, lateral, underground development work, is to be fully funded from dedicated funds remaining in Ivanhoe’s treasury from the US$280-million received in 2011; statements regarding the expectation that early works for Shaft 2 are to begin next year; statements regarding the company’s plans to develop the Platreef Mine in three phases: an initial annual rate of four million tonnes per annum (Mtpa) to establish an operating platform to support future expansions; followed by a doubling of production to eight Mtpa; and then a third expansion phase to a steady-state 12 Mtpa; and statements regarding the planned underground mining methods. Readers are cautioned that actual results may vary from those presented.

All such forward-looking information and statements are based on certain assumptions and analyses made by Ivanhoe Mines’ management in light of their experience and perception of historical trends, current conditions and expected future developments, as well as other factors management believe are appropriate in the circumstances. These statements, however, are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking information or statements including, but not limited to, unexpected changes in laws, rules or regulations, or their enforcement by applicable authorities; the failure of parties to contracts to perform as agreed; social or labour unrest; changes in commodity prices; unexpected failure or inadequacy of infrastructure, industrial accidents or machinery failure (including of shaft sinking equipment), or delays in the development of infrastructure, and the failure of exploration programs or other studies to deliver anticipated results or results that would justify and support continued studies, development or operations. Other important factors that could cause actual results to differ from these forward-looking statements also include those described under the heading “Risk Factors” in the company’s most recently filed MD&A as well as in the most recent Annual Information Form filed by Ivanhoe Mines. Readers are cautioned not to place undue reliance on forward-looking information or statements. The factors and assumptions used to develop the forward-looking information and statements, and the risks that could cause the actual results to differ materially are presented in the Platreef 2016 Resource Technical Report dated June 24, 2016, available on SEDAR at www.sedar.com and on the Ivanhoe Mines website at www.ivanhoemines.com.

Although the forward-looking statements contained in this news release are based upon what management of the company believes are reasonable assumptions, the company cannot assure investors that actual results will be consistent with these forward-looking statements. These forward-looking statements are made as of the date of this news release and are expressly qualified in their entirety by this cautionary statement. Subject to applicable securities laws, the company does not assume any obligation to update or revise the forward-looking statements contained herein to reflect events or circumstances occurring after the date of this news release.

Investors
Bill Trenaman
+1.604.331.9834Media
North America:
Bob Williamson
+1.604.512.4856

South Africa:
Jeremy Michaels
+27.11.088.4300
www.ivanhoemines.com


Ivanhoe Reports an Increase in Indicated Mineral Resources of 58 percent

Ivanhoe Mines (TSX:IVN) has reported a substantial increase in Indicated and Inferred Mineral Resources at its Platreef Project in South Africa’s Bushveld Complex. The updated estimate is for Mineral Resources amenable to underground mining methods within Platreef’s Flatreef Deposit. It is the first update of the overall resource estimate to be issued in more than three years.

As quoted in the press release:

Highlights of the Platreef Project’s updated Mineral Resource estimate include:

  • An increase of 58% in the Indicated Mineral Resources tonnage to 346 million tonnes, at a grade of 3.77 grams per tonne (g/t) platinum, palladium, rhodium plus gold (3PE+Au), 0.32% nickel and 0.16% copper, at a cut-off grade of 2.0 g/t 3PE+Au.
  • An increase of 21% in the Inferred Mineral Resources tonnage to 506 million tonnes, at a grade of 3.24 g/t 3PE+Au, 0.31% nickel and 0.16% copper, at a cut-off grade of 2.0 g/t 3PE+Au.
  • An increase of 45% in the contained metal in Indicated Mineral Resources, at a cut-off grade of 2.0 g/t 3PE+Au, totaling 41.95 million ounces of 3PE+Au, plus a 47% increase in nickel to 2.44 billion pounds and a 50% increase in copper to 1.23 billion pounds.
  • Contained metal in Inferred Mineral Resources, at a cut-off grade of 2.0 g/t 3PE+Au, has increased by 11% to total 52.77 million ounces of 3PE+Au, nickel has increased by 13% to total 3.44 billion pounds and copper has increased by 18% to 1.78 billion pounds.
  • An average thickness of 19 metres in the area of the TCU-T2 mineralized zone where Indicated Mineral Resources are estimated and an average thickness of 13 metres for the area where Inferred Mineral Resources are estimated, using the 2.0 g/t 3PE+Au cut-off.

Click here for the full press release.


Anglo American Reports Q4 Production Results

Anglo American plc (LSE:AAL) released its production report for the fourth quarter of 2015, as well as 2015 as a whole, commenting that for the full year it saw declines in nickel, diamond, iron ore, copper and thermal coal.

The company’s production of platinum and metallurgical coal increased for the year.

Highlights for Q4 2015 include:

  • Q4 2015 production increased by 3% (on a copper equivalent basis) compared to both Q4 2014 and Q3 2015. The 2015 full year production increased by 5% (on a copper equivalent basis)(7).
  • Iron ore production from Kumba decreased by 12% to 10.9 million tonnes as Sishen is being transitioned to a lower cost pit configuration.
  • Minas-Rio produced 3.3 million tonnes (wet basis) of iron ore, a more than fourfold increase compared to 0.7 million tonnes in Q4 2014, reflecting the ongoing ramp up of the operation.
  • Export metallurgical coal production increased by 11% to 5.5 million tonnes due to strong operational performances at both Grasstree and Moranbah.
  • Export thermal coal production decreased by 21% to 7.7 million tonnes due to the impact of strikes in South Africa and weather related production issues at Cerrejón.
  • Copper production from the retained operations (excluding the AA Norte assets that were sold effective 1 September 2015) increased by 23% to 181,400 tonnes due to higher grades, throughput and metal recoveries. Overall copper production increased by 4%.
  • Nickel production increased by 57% to 10,500 tonnes following the successful completion of the planned Barro Alto furnace rebuilds.
  • Niobium production increased by 23% to 1,600 tonnes with the continuing ramp up of the Boa Vista Fresh Rock (BVFR) plant. Fertiliser production increased by 6%.
  • Platinum production (expressed as metal in concentrate)(5) was broadly flat at 598,000 ounces with operational improvements at own operations, offset by a reduction in purchase of concentrate ounces from third parties.
  • Diamond production decreased by 16% to 7.1 million carats, reflecting the decision to reduce production in response to trading conditions.

Click here to read the full Anglo American plc (LSE:AAL) press release.


NUM Signs Three-year Wage Deal at Nkomati Nickel Mine

Mining Weekly reported that South Africa’s National Union of Mineworkers (NUM) has signed a three-year wage deal for the Nkomati nickel mine. Nkomati is owned by African Rainbow Minerals Ltd. (JSE:ARI) and Russia’s Norilsk Nickel (MCX:GMKN).

As quoted in the market news:

The deal followed a three-day strike which started on Sunday evening. The agreement is effective from the 1st of July.

The agreement would see workers receiving increases of 8.5% in the first year, up to 9% in the second year and up to 10% in the third year, according to their category. Workers would also receive a housing allocation of R2 930 in the first year, rising to R3,512 in the third year and a medical award that started at R1 953 and rises to R2 342. There is also a long service award that would see workers with 10 years of service receive R4 000, while those with 25 years of service would receive R12 000.

Click here to read the full Mining Weekly report.


What’s Next for BHP Billiton’s Nickel West?

What's Next for BHP Billiton's Nickel West?

In a move that some believe was inevitable, BHP Billiton (ASX:BHP,NYSE:BHP,LSE:BLT) announced last Wednesday that it has abandoned plans to sell its Western Australian Nickel West business. Instead it will keep it in its portfolio as a non-core asset. 

Nickel West, which includes the Mt. Keith, Cliffs and Leinster mines, has been in limbo since May of this year, when BHP put it under review. At the time, the company said that it was considering “all options” for the asset’s long-term future, “including the potential sale of all or parts of the business.”

As time passed, it became clear that a sale was the preferred option for BHP. In August, the miner revealed plans to focus on the ”four pillars” of iron ore, copper, coal and petroleum by spinning off its aluminum and manganese businesses, along with its Australian metallurgical coal assets and South African thermal coal operations. Individual assets like the Colombia-based Cerro Matoso nickel project and Cannington zinc-lead-silver mine were also earmarked for the new company.

Nickel West, however, was set aside in hopes that it would be sold separately. So what went wrong?

Interest wasn’t the problem. According The Globe and Mail, Glencore (LSE:GLEN) and China’s Jinchuan Group were potential buyers, and indeed the Financial Times quotes Ivan Glasenberg, CEO of the former, as saying, “Nickel West is out in the market and you know us, we kick tyres and look at anything which is available.”

Instead it seems that price may have been at least part of the issue. The West Australian states that BHP originally placed a value of $500 to $800 million on Nickel West, but would have sold it for as little as $300 million if the buyer had agreed to take on clean-up costs for the sites, which analysts have pegged at AU$1 billion. However, industry sources have said that “no final bids received over the past fortnight came close” to what the mining giant was looking for.

For its part, BHP has said only that the sale of the business was not “achieved on an acceptable basis,” adding that it “will only pursue options that maximise value for shareholders.”

Unfortunately, some market watchers believe the opportunity to achieve maximum shareholder value through the sale of Nickel West has passed. Speaking to the Financial Times, Morningstar analyst Mark Taylor noted, “[t]he time to sell these mining assets was during the boom. It is difficult to attract a good price when commodity prices are softening.”

And indeed, nickel hasn’t been having the best time lately. As The Globe and Mail notes, while the metal was up 50 percent since the start of the year when BHP first announced its review of Nickel West, it’s now down 26 percent from this year’s peak. Some analysts even believe a surplus is in store for the base metal.

None of that sounds like good news for Nickel West, but perhaps the most damning piece of news to come to light these past few days is that BHP executives have reportedly told those working at the business that it will “cease to exist by the end of the decade.”

Specifically, states another article from The West Australian, sources have said that “Nickel West staff were told there [will] be no significant new capital injections and BHP expect[s] the unit [will] cease to exist by 2019″ — that’s the year Nickel West’s major offtake and supply contracts expire. BHP hasn’t confirmed that rumor, but a spokesperson did tell the news outlet that due to “intense internal competition,” the asset is only likely to receive the sustaining capital it needs to keep “deliver[ing] safe and efficient production.”

Though of course making assumptions is rarely a smart move in the resource sector, at the moment it’s looking like Nickel West’s days may be numbered. Nickel market participants would do well to keep their eyes peeled for further statements from BHP.

 

Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article. 

Related reading: 

BHP to Say Goodbye to Businesses Worth US$16 Billion in Spin Off

After All the Bans, a Surplus on the Way for Nickel?


Norilsk to Sell Australian Nickel Assets

Reuters reported that Russia’s Norilsk Nickel (MCX:GMKN) will sell its Australian nickel assets, Avalon and Cawse, to Wingstar Investments Pty Ltd., an investment firm. The deal, which is subject to regulatory approval, is expected to close in the second half of 2014.

As quoted in the market news:

Norilsk, partially owned by Russian tycoon Vladimir Potanin and aluminium giant Rusal, decided last year to focus on core domestic operations, selling off assets in Australia, South Africa and Botswana.

Norilsk declined to disclose the value of the deal with Australia-focused Wingstar Investments. Production at Avalon and Cawse was suspended in 2003 and 2008, respectively.

Click here to read the full Reuters report.


Ivanplats’ Flatreef Discovery Shows Substantial Nickel Deposits

Ivanplats’ (TSX:IVP) CEO, Robert Friedland, announced today that an intensive drilling program at its Flatreef Discovery project in South Africa showed results for indicated and inferred resources with substantial amounts of nickel deposits.

As quoted in the press release:

Flatreef is distinguished from other Bushveld projects by its tremendous size, the remarkable thickness of the polymetallic mineralized reef and its potential for significant by-product credits of nickel and copper,” Mr. Friedland said.

Click here to read the full Ivanplats (TSX:IVP) press release.


Norislk Nickel Considers Nickel, Copper, Platinum Licenses

Reuters reported Norilsk Nickel (LSE:MNOD) it is considering deals and the acquisition of copper, nickel and platinum licenses to strengthen its hold in Africa.

As quoted in the market news:

Norilsk’s low-cost Arctic operations account for the bulk of its production. Analysts have said it could benefit from troubles battering peers in platinum producing South Africa, hobbled by violent strikes that have lifted the price of the precious metal.

Click here to read the full Reuters report.


Inside the Russian Nickel Mining Industry

Inside the Russian Nickel Mining IndustryRussia was the leading nickel producer in 2011, according to the US Geological Survey. In all, the country’s mines pumped out 280,000 metric tons (MT) of the metal, up from 269,000 in 2010. That put it well ahead of the Philippines and Indonesia, which were tied at 230,000 MT each in 2011.

Russia is also home to the world’s fourth-largest nickel reserves, which total about 6 million MT.

Roughly 85 percent of the country’s production, or 237,000 MT, comes from Norilsk Nickel (MCX:GMKN), the world’s leading producer of nickel and palladium.

Norilsk remains the cornerstone of Russian nickel mining

The company traces its roots back to the earliest years of the Soviet Union and to some of the most inhospitable territory on Earth. Russians had known that there was nickel in the Taimyr Peninsula on the Arctic Ocean since the 1600s. But it was not until the 1920s that the country took a serious look at exploiting the resource.

Norilsk was officially born in June 1935, when the Council of the Peoples’ Commissars passed a resolution to form the “Norilsk Combine.” The government then turned construction work over to the Soviet security services, which used political prisoners to build the facility. By the time it went into production in 1939, it boasted a small metallurgical works, a workshop for repairing gear and a temporary power station. It shipped its output — including nickel and copper — out via a new railway to a port at Dudinka on the Yenisey River.

By 1953, Norilsk was well on its way to dominating Russia’s nickel market, accounting for 35 percent of the country’s total output, as well as 12 percent of its copper and 90 percent of its platinum group metals.

Norilsk Nickel was privatized, but its ownership is still highly concentrated

Under market reforms brought in by the Gorbachev government in 1989, Norilsk was combined with the Olenegorsk mechanical works and two other nickel companies, and renamed RAO Norilsk Nickel.

President Boris Yeltsin’s government then privatized Norilsk in 1994, after the breakup of the Soviet Union. As part of that transformation, the government sold a controlling stake in the company to Uneximbank, which was controlled by two wealthy Russians with close ties to the Yeltsin administration: Vladimir Potanin and Mikhail Prokhorov. (Potanin currently ranks fourth on Forbes’ list of wealthiest Russians; Prokhorov, who recently ran in the country’s presidential elections, sits in seventh spot.) After the deal went through, Prokhorov became chairman of Norilsk’s board of directors.

In 2005, Prokhorov spun off Norilsk’s gold mining assets into a separate company, Polyus Gold, which is now Russia’s largest gold producer.

Right now, three shareholders, including Potanin, hold 74 percent of Norilsk’s shares (Prokhorov sold his 25 percent interest in 2008.) Polyus, too, remains firmly under the control of its founding shareholders, with Prokhorov and Suleiman Kerimov — who currently ranks 19th on Forbes’ list of wealthiest Russians — holding 78 percent.

Norilsk Nickel goes far beyond Russia

Nickel accounted for 50 percent of Norilsk’s revenue in 2011, followed by copper (25 percent), palladium (15 percent), platinum (9 percent) and gold (1 percent). In all, it produced 295,000 MT of nickel during the year. That’s down slightly from 297,000 MT in 2010, but up sharply from 283,000 MT in 2009.

The company operates through five divisions:

  • The Polar Division, which includes Norilsk Nickel’s original assets on the Taimyr Peninsula, consists of six underground mines and one open-pit operation. This division produced 124,000 MT of nickel in 2011;
  • Kola MMC, which includes three underground mines and one-open pit operation in the Murmansk region. Its 2011 nickel production was 113,000 MT;
  • Norilsk Nickel Finland, which consists of the Harjavalta facility, Finland’s only nickel-refining plant, with a capacity of 60,000 MT;
  • Norilsk Nickel Africa, which includes the company’s 85 percent stake in Tati Nickel in Botswana (that country’s government holds the other 15 percent). Norilsk acquired this stake when it took over LionOre Mining International in 2007.
    Tati has two mines in Botswana, one of which was shut down in 2002 because its deposit was exhausted (although Norilsk is investigating the possibility of further mining at the site). In all, Tati produced 7,000 MT of nickel last year. Norilsk also owns 50 percent of the Nkomati joint venture in South Africa, which produced 5,000 MT of nickel in 2011;
  • Norilsk Nickel Australia also came over as part of the LionOre acquisition. It consists of four mines, all of which Norilsk shut down in 2008 and 2009 due to low nickel prices. However, it has recently restarted one of these projects, the Maggie Hays mine, located 540 kilometers from Perth. Norilsk expects the project to produce 8,400 MT of nickel in 2012.

The company releases its financial results in annual and six-month (January through June) intervals. It recently said that it expects to report net income of $1.5 billion in the first half of 2012 on revenue of $6 billion. That’s down from $1.8 billion in profit on $7.3 billion of revenue in the first six months of 2012, largely due to a sharp decline in nickel prices.

Russian law puts heavy restrictions on foreign investment

One reason for Norilsk’s dominance is the sharp restrictions placed on foreign investment in the country’s mining sector. For example, Russia classifies nickel as a metal of “federal significance.” That makes it much harder for foreign companies to mine deposits, and introduces significant political risk because the government can refuse or terminate a permit held by a firm with 10 percent or more direct or indirect foreign investment at any time.

However, there have been calls for reform of the country’s restrictive mining laws in hopes of speeding up resource development. And there are signs the government is listening: last month, it announced a draft bill that will sharply increase the size of gold deposits that foreign-owned firms are allowed to mine without having to seek the Russian government’s permission from 50 MT to 250 MT.

“The fact that no government approval would be required should give more comfort to exploration companies to start exploring again,” Lou Naumovski, head of gold miner Kinross Gold’s (TSX:K,NYSE:KGC) Moscow office, told Reuters.

“The other important measure is the suggestion that a discoverer of a strategic [gold] deposit could proceed to mine development without the threat that the government could withdraw the licence with only modest compensation,” he added.

 

Securities Disclosure: I, Chad Fraser, hold no positions in any of the companies mentioned in this article.


Glencore Finalizes Xstrata Takeover Bid

Bloomberg reported Xstrata Plc (LSE:XTA) rose to a four-month high as Glencore International Plc (LSE:GLEN) made another offer for the Swiss mining company.

As quoted in the market news:

Glencore said its offer represents a “substantial premium” for a company with a 34 percent shareholder, referring to its stake in the company, which also produces copper, zinc, nickel and lead from mines in Australia, South Africa,South America and Canada.

Click here to read the full Bloomberg report.


NUM Threatens Strike At Nickel Mine

Reuters reported a South African union has threatened a workers strike at Arican Rainbows Minerals (PINK:AFRBY) and Norilsk Nickel (LSE:MNOD) joint venture nickel mine.

As quoted in the market news:

The largest mining union in South Africa has declared a dispute with the mine owners over wages and NUM’s Regional Secretary in North East, William Mabap, said it would not hesitate to call a strike.

Nkomati mine is situated in Machadodorp in Mpumalanga and produced 10,100 tonnes of nickel in 2011.

Click here to read the full Reuters report.