NEW CALEDONIA - Swiss mining conglomerate XSTRATA PLC has approved the development of the Koniambo nickel project, noting that it will be a major long-life, low-cost, open pit mine and plant. Xstrata holds a 49% stake in the operating company, Koniambo Nickel SAS, and the Societe Miniere du Sud Pacific of New Caledonia holds the other 51%.
Koniambo will be among the world's lowest cost producers of nickel with initial annual production of 60,000 tonnes of nickel in ferronickel per annum and substantial further high-return, brownfield expansion potential. First ore is expected to be processed in the first half of 2011, ramping up to steady state production in 2013. The project will cost US$3.8 billion, to be funded mostly through Xstrata's internal cash reserves on operating cash flow.
Koniambo benefits from a world-class resource base, providing a mine life in excess of 25 years from 62.5 million tonnes of saprolite reserves grading 2.40% Ni at a 2.0% cut-off grade. This major resource also has the potential to extend mine life to well in excess of 50 years of economic production, according to Xstrata. The resource base currently comprises 142.1 million tonnes of measured and indicated saprolite resources at 2.13% Ni using a 1.5% Ni cut-off grade, 140.7 million tonnes of inferred saprolite resource, grading 2.16% Ni (1.5% Ni cut-off) and 104.0 million tonnes of inferred limonite resources at 1.5% Ni (1.2% Ni cut-off).
Nickel will be produced using Xstrata's smelting technology which integrates calcining, reduction and smelting unit operations from the mineral processing industry with dust containment and counter-current gas flow technologies from the cement industry. The benefits associated with this technology include higher metallurgical recoveries, improved dust containment and lower operating costs than conventional ferronickel operations.
The decision to approve the Koniambo project comes after a one-year renewal phase, during which XSTRATA NICKEL and its partners undertook extensive work to optimize the scope, design and financing of the project. This renewal phase enabled the four major risks associated with the project to be closely defined: execution risk, project stability, socio-political risks, and environmental risks. Comprehensive mitigation strategies have been put in place to address each of these risk areas, including the development of a robust execution plan, a modular approach to engineering and construction, an innovative procurement strategy, comprehensive stakeholder consultation and environmental planning.
The presentation that accompanied the announcement is posted at www.Xstrata.com in the Publications section.