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Gold/Mining/Energy : Mining News of Note -- Ignore unavailable to you. Want to Upgrade?

To: LoneClone who wrote (19403)	5/12/2008 10:36:01 AM
From: LoneClone	Read Replies (1) \| Respond to of 195027

Toledo Mining Starts To Get Serious About Downstream Nickel Production By Alastair Ford minesite.com[tt_news]=45576&tx_ttnews[backPid]=755&cHash=932d6ddf52 According to George Bujtor, chief executive of Toledo Mining, there’s six million tonnes of nickel laterite ore sitting in ports in China. That may be one reason why the nickel price has come off last year’s highs to the point where some companies that had planned direct shipping operations are thinking again. “Remember”, says Mr Bujtor, “there wasn’t a market for this ore two years ago”. The implication is - although unstated - that two years hence, there may once again be no market for shipping wet nickel laterite to China. But in the immediate term for Toledo it’s full steam ahead, as the company still makes money at the current LME US$28,000 per tonne spot price, and can clear a strong margin all the way out to the 27 month forward curve. US$17,000 nickel is Toledo’s current break-even from its Berong laterite nickel property on Parawan island in the Philippines, where the ball-park resource is estimated at between 350 million tonnes and 450 million tonnes. The last 12 months have been a bit of a rollercoaster for Toledo. Not only has nickel come a long way back from last summer’s heady heights, but the company has faced difficulties on the ground at Berong from adverse weather, rough seas, and lower grades. The actual mining of the ore presents very few difficulties: the company digs it up and trucks it to the coast. But if the ships can’t stand close-in off-shore, none gets loaded, and more importantly none gets sold. The season of inclement weather is now over, but Toledo has now woken up to the fact that realistically speaking there’s only a seven month shipping window every year. For the other five months the company will have to concentrate on stock-piling. Not so great when sales are FOB. But at the moment Toledo is loading around 10,000 wet tonnes of ore per day, and the grades have recovered too. So sales are fine at the moment. You can sense a certain relief in Mr Bujtor that the winter troubles are over. Now selling his ore at a price of US$41 per wet metric tonne, and mining it for half that cost, the smile is back on his face. But direct shipping ore is, and always was for Toledo, a near-term project. It generates cash – well and good for a twitchy London market that bid the company’s shares up to near 500p last year, but is now buying and selling at around the 130p mark. So as long as LME nickel stays above US$17,000 and the Chinese demand for Toledo’s nickel laterite ore – which also has an iron content - as an iron ore substitute, then there’ll be no need for any cash call and no threat of dilution. There may yet be a fund raising down the line, though, if all goes Mr Bujtor’s way. That’s because the company’s long-term strategy to avoid any further squeeze on direct shipping margins is to go downstream and start processing the ore on site. Plans for this are already well advanced. The current thinking is for atmospheric leaching of the ore in vats to produce a nickel hydroxide concentrate. “We’ve done a lot of met work”, says Mr Bujtor. “We know the material leaches”. It won’t be cheap – an acid production facility alone will come in at hundreds of millions dollars, but on that score Mr Bujtor isn’t too worried, even if his shares are way off their 12 month high. “There’s a lot of options these days”, he smiles, hinting that perhaps the Chinese themselves might come up with the necessary funding. However that goes, on a loose and lucky timetable Toledo could be producing concentrate as early as 2011. The next stage is a full feasibility study, and putting the necessary permits in place. Mr Bujtor describes the Philippines as “friendly, but not fast”, so don’t expect imminent news. On the other hand, don’t be surprised if the company’s shares eventually resume an upward trajectory.