MADAGASCAR - The Ambatovy project has received certification under Madagascars Large Mining Investment Act (LGIM), according to operator DYNATEC CORP. of Richmond Hill, Ont. The LGIM establishes the legal framework for developing and operating large-scale resource projects in the country, and provides the equivalent of a project stability agreement.
Ambatovy will consist of an open-pit laterite mining operation and an ore preparation plant at the mine site. The slurried ore will be delivered via pipeline to a process plant and refinery near the Port of Toamasina on the east coast. The project is on track for construction to begin by mid-2007, subject to completion of the project debt financing, and mechanical completion is expected by early 2010.
Key terms of the LGIM include the following. The tax and legal stability are guaranteed. Corporate tax rates are set at 10% for the transformation of minerals into value-added products, and 25% for straight mining and beneficiation operations. The investment tax credit is based on 50% of the capital investment, applied against taxes due and payable.
There will be a royalty payment of 1% for value-added mineral products. There can be up to 75% debt financing, from external or shareholder sources, and repayment of loan principal and interest without withholding tax. A 10% withholding tax is applicable to dividends to foreign shareholders. The value-added tax is neutralized for operations and subcontractors. Customs duties are eliminated as well as dedicated customs posts for import/export, with the exception of 5% customs duty on consumables at the mine.
There will be international dispute arbitration and a waiver of sovereign immunity on the enforcement of arbitrated awards. The owners are granted the ability to maintain and operate offshore bank accounts.
The Ambatovy project is among the largest nickel projects under development in the world, with production costs for nickel after byproduct credits expected to be among the lowest in the industry. Annual production capacity is estimated at 60,000 tonnes of nickel, 5,600 tonnes of cobalt and about 190,000 tonnes of ammonium sulphate, with an estimated project life of at least 27 years. Ambatovy is currently owned 45% by Dynatec and 27.5% by each of SUMITOMO CORP. of Japan and KOREA RESOURCES CORP.
For details about the Ambatovy project including a short video, visit www.dynatec.ca.