Tuesday September 12, 11:50 am Eastern Time
Mergers seen unlikely in nickel industry
By Martin Hayes
HELSINKI, Sept 12 (Reuters) - The global nickel industry is likely to escape the rationalisation and integration taking place among many metal mining and producing companies, delegates attending a seminar here said.
The copper, aluminium, gold, and iron ore sectors had already seen a wave of mergers and acquisitions over the past year, involving companies as diverse as Grupo Mexico , Asarco, Alcan (Toronto:AL.TO - news), Alusuisse , Rio Tinto (quote from Yahoo! UK & Ireland: RIO.L), Billiton (quote from Yahoo! UK & Ireland: BLT.L) and Anglo American (quote from Yahoo! UK & Ireland: AAL.L). But although Billiton now wholly owned Australia's QNI, the nickel sector had been largely immune from the bigger is better mentality.
``Rationalisation has not taken place. It should have occurred 20 years ago, but apart from Sudbury, where Inco and Falconbridge are close, nickel is geographically diverse,'' Peter Johnston, executive general manager for nickel, WMC Australia (Australia:WMC.AX - news), said at a Metal Bulletin nickel seminar here.
The nickel market was dominated by just six major players that were already fully integrated, he said.
John Barkas, head of research at industry consultants AME Mineral Economics, noted that five nickel companies - Inco (Toronto:N.TO - news), Falconbridge (Toronto:FL.TO - news), Eramet-SLN , Billiton through QNI and WMC -- accounted for 60 percent of nickel output in the west.
In zinc, the top five controlled 40 percent of production, while in copper, even after mergers and acquisitions, the five biggest companies at present had a 45 percent share of total mined metal, he said.
``The thing that is going to happen is strategic alliances. It is going to be very difficult for a new pressure acid leach (PAL) project to get off the ground without the backing of an industry major,'' Barkas said.
JOINT VENTURES
In the late 1990s three Australian PAL projects suffered well documented delays and cost overruns, which meant that finance for a second wave would be difficult to secure, analysts said.
``A lot of people...fell over themselves (to finance PALs). That certainly isn't the case now,'' one analyst said.
Laterite production from Anaconda Nickel's Murrin Murrin (Australia:ANL.AX - news), with a capacity 45,000 tonnes a year, Preston's Bulong and Centaur's (Australia:CTR.AX - news) Cawse, both 9,000 tonnes a year, had been hit by start-up and commissioning problems, with output less than forecast and costs higher than anticipated.
Ken Hellsten, general manager of QNI Ltd, Western Australia, said in the three original laterite projects that while capex overruns were not excessive, the provisions for working capital were significantly underestimated at the financing stage.
That had impacted on operating costs. Cawse at $2.90/lb was a dollar above forecast, while Bulong and Murrin costs of $4.50/lb were well above projected levels of $2.40 and $1.41.
``The next phase will be conservatively designed, and involve joint venture partners. They will be staged out over the next 10 years,'' Hellsten said.
Strategic alliances were taking place in the nickel sector, with Anaconda Nickel entering into agreements with Centaur, Homestake Gold (NYSE:HM - news) and Goldfields Ltd (Australia:GLD.AX - news). |
