Albidon draws down finance for Munali nickel project

Low cost high quality Zambian nickel mine is under construction and due on stream next year.

LONDON - 

Albidon Limited is listed on AIM (ticker symbol ALD) and the ASX (ticker symbol ALB) with market capitalisation of £179 million (US$364 million) and is concentrating on developing projects in Africa, with the emphasis on nickel, while developing platinum projects and working with joint venture partners to develop uranium and zinc prospects. 

The most recent news from the company is the first draw down from a US$60 million finance package of senior debt financing from the European Investment Bank and Barclays Capital for the Munali nickel project in Zambia, the company's primary target.  A life-of-mine concentrate offtake contract and a US$25 million offtake financing agreement were signed in December 2006 with the Jinchuan Group, the major Chinese producer of nickel, cobalt and platinum group metals.  Other projects are at an early stage of exploration and include a high-grade platinum discovery at Luwumbu in Tanzania, along with identified targets that have yet to be drilled, including the Songea nickel project in Tanzania.

Munali is a nickel sulphide deposit and is expected to have a life in excess of ten years and the plan is for 8,500 tonnes per annum of high-quality nickel-copper-cobalt-platinum-palladium concentrate, from a 900,000 tpa underground mining operation.  The property is located approximately 60 kilometres south of Lusaka.  The project area comprises the Enterprise deposit plus a number of other nickel prospects in the Munali Intrusion, of which the most advanced is the Voyager prospect, which lies along strike to the north of Enterprise.  Enterprise is open down dip and along strike to the north and the company believes than further exploration will extend the mine life.

Extraction methods are straightforward and processing technology conventional.  The bankable feasibility study indicates a direct cash operating cost of US$2/lb of nickel in concentrate, before by-product credits (estimated at 40 cents/lb) and smelting and refining charges, while the average cash nickel price in 2007 to date is $19.41/lb.  The latest metals markets review from GFMS Metal Consulting Ltd notes that late July prices were down by 44% from the year-to-date high of $24.58 recorded in late May and that from a fundamental standpoint the market remains under pressure as most of the factors that have weakened the market have yet to run their course. This is likely to be temporary, however.  The Group is looking for a small deficit in the nickel market for this year as a whole, and it suggests that by the fourth quarter of this year the market could once again be focusing on structural supply tightness.

In the second quarter of this year Albidon hedged 9,020 tonnes of nickel for delivery between June 2009 and December 2013, representing approximately 15% of the project's payable nickel production.

The latest published resource at Munali is 8.0 million tonnes at 1.4% nickel and 0.9 g/t PGM, containing 109,000 tonnes of nickel and 223,000 ounces of PGM at a 0.7% nickel cut-off.  Some 6.9 million tonnes of this is classified as Indicated Mineral Resource. An initial Probable Reserve has been calculated at 6.7 million tonnes at 1.23% nickel, 0.17% copper, 0.07% cobalt, 0.53 g/t palladium and 0.23g/t platinum.  Drilling remains encouraging, with the latest results showing interesting grades consistent width, in excess of the existing resource model, including 13.6 metres at 0.91% nickel, 0.14% copper, 0.06% cobalt and 1.3 grammes/tonne platinum+palladium, and 13.4 metres at 1.01% nickel, 0.15% copper, 0.06% cobalt and 0.75 g/t platinum+palladium.  Indicative specifications for the nickel concentrate from Enterprise are: nickel, 14%; copper, 2.6%; cobalt 0.7%; palladium, 7.9 g/t; and platinum, 1.9g/t.

Munali's bankable feasibility study was completed in July 2006 and construction is underway with the commissioning of the processing plant and first deliveries of concentrate due in the first half of 2008.  Total capital costs are estimated at US$65 million, while working capital and ongoing mine development costs will add a further US$25 million.  The draw down to the facility from the European Investment Bank and Barclays complete the funding of the project, and all conditions precedent have now been signed off.

On the basis of the fundamental outlook for the nickel market this looks as if it will be highly profitable project that should help to underpin Albidon's developments elsewhere. 

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Related Links ARTILCES:  Albidon hedges Zambia nickel output and boosts exploration  Australia’s Albidon awards contract to develop Zambia’s Munali project  Albidon gets $60 million for Zambia nickel mine  Albidon turns to China to finance Zambian nickel project development  Albidon & African Energy find more uranium in Zambia  OTHER PAGES:  BASE METALS EUROPE AND MIDDLE EAST

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