MADAGASCAR - Japan's SUMITOMO CORP. is acquiring a 25% interest in the Ambatovy nickel project from DYNATEC CORP. of Toronto. Both Dynatec and the third partner, IMPALA PLATINUM (Implats) of Johannesburg, will reduce their holdings from 50% to 37.5% each.
For its part, Sumitomo will guarantee an offtake of 30,000 tonnes of nickel during each of the first 15 years of production. It will also participate in a pro rata share of project financing, provide financing to Dynatec, and provide a project completion cross guarantee.
The Ambatovy feasibility study released by Dynatec in February 2005 indicated the potential for annual production of 60,000 tonnes of nickel metal and 5,600 tonnes of cobalt metal, with cash operating costs expected to be near the bottom of the global cost curve. Over the first 10 years of full production, the project is expected to have average cash operating costs of US$0.67/lb of nickel after credits and to generate average after-tax cash flow of US$338 million/year, assuming base case pricing of US$3.50/lb for nickel and US$10.00/lb for cobalt.
The feasibility study estimated that the capital costs for the project would total US$2.25 billion. These costs are currently being reviewed in light of the potential savings as a result of the decision to locate the refinery portion of the Ambatovy project in Springs, South Africa, thereby leveraging Implats' core competencies and existing infrastructure.
Detailed engineering work at Ambatovy is progressing, and is expected to be sufficiently advanced for construction to begin by the second quarter of 2006, assuming sufficient progress with negotiations for project debt financing. Based on this timing, and the current construction schedule, initial production could be recorded by the end of 2008. Details of the project are available at www.Dynatec.ca.