The Munali nickel mine in Zambia will restart operations in 2019 now that its operator, Consolidated Nickel Mines, has secured financing for the project.
The Munali nickel mine, which was seemingly down and out following financing problems of its previous operator and a subsequent nickel price fall in 2011, is on its way back.
The mine’s current Zambian operator, Mabiza Resources — a subsidiary of UK-based Consolidated Nickel Mines — announced on October 6 that a restart was on the horizon.
The Munali mine was placed into care and maintenance in 2011 by its previous owner Albidon, after a less than flattering review of its Zambian operations revealed serious cash flow difficulties, compounded by a downturn in the nickel price.
Albidon’s woes ended in 2013 after it was purchased in its entirety by Chinese company Jinchuan Group (HKEX:2362).
Jinchuan continues to hold on to Munali, as Consolidated Nickel reported that it came on as a partner with the Chinese company to restart the mine through a lease and royalty agreement.
Consolidated Nickel said that with financing in place, the mine, some 75 km south of Lusaka in Zambia, would recommence operations by Q1 2019, and ramp up to 25,000 tonnes of nickel concentrate production by the end of the year at a throughput rate of 60,000 tonnes of ore per month.
Consolidated Nickel will be the operator of the mine through Mabiza Resources. The company said that Jinchuan had acquired a 32-percent stake in Consolidated Nickel and would appoint 3 board members in return for financing, which is reported to be around US$40 million.
According to the UK-based company, more than US$180 million has been spent on the Munali mine in its previous life, but on its website it blames the use of “the wrong geologic model” and “the wrong mining method being employed” as the reason for being placed into care and maintenance seven years ago.
The company is confident that the same mistakes won’t be made this time around.
“[Consolidated Nickel] has spent the past two years conducting extensive evaluation and study work at Munali to put together a sustainable restart plan. A new geological model has been developed, a new JORC resource has been defined and a new mining method has been planned to extract the nickel from the ore body more efficiently and economically,” it says on its website.
In 2011, the nickel price fell from comparatively stratospheric heights of US$20,000 a tonne-plus to around US$17,000 a tonne by the end of the year.
Today, in 2018, the nickel price is even lower, with the base metal languishing under the weight of the trade war between the US and China. Before the fears of economic calamity set in, the metal was only just beginning to push above US$15,000 a tonne in June — while 4 months later in October, it sits closer to US$12,000 a tonne.
This year, Zambia has joined a number of other African countries in raising taxes in mining (or threatening to do so), flagging an increase on royalties in order to reign in debt. According to reporting however, the government in Lusaka is more open to negotiations with mining interests as mining accounts for more than 70 percent of the southern African nation’s foreign exchange earnings.
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Securities Disclosure: I, Scott Tibballs, hold no direct investment interest in any company mentioned in this article.