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Uncertainity surrounds Munali Nickel mine’s future

Uncertainity surrounds Munali Nickel mine’s future
Written by Chiwoyu Sinyangwe and Nchima Nchito Jr
Saturday, February 28, 2009 9:22:37 AM

THE future of Munali Nickel mine in Mazabuka is uncertain after a planned US $26 million (about K 145 billion) funding injection from a United States (US) private investment fund failed to come through.

Munali Nickel mine is the country's inaugural and sole nickel mine which is operated by Perth based Albidon Mines Limited that was hoping to secure financing from private investment fund.

Shares in the company had been placed in a trading halt while the board works to cradle an alternative fundraising proposal, which the company said was at an advanced stage of negotiation.

And according to the statement by Albidon to the Australian Securities Exchange, the funding was necessary for the company to continue operating.

“The company announced last month that US private investment fund Pacific Road Resources Funds would kick in US $26 million via convertible notes for working capital and to help the company ramp up to full production at its Munali nickel project in Zambia,” the statement read in part.

Albidon has been a victim of the tumbling nickel prices, commissioning delays at the mine and a tighter investment market in the resources industry.

In December, the company was forced to axe more than 40 per cent of its workforce and close its Cape Town exploration office.

Its share price has taken a massive dive having traded above US $5 less than a year ago to its current level of 7.2 cents.

And Albidon Limited has revealed that production at its Munali Nickel project for the December 2008 quarter was below forecast when it mined around 85,562 tonnes of nickel. It projected a production of around 115,000 tonnes for the period under review.

In a Business update, the company stated that it was looking at measures to ensure profitability.

“The company is pursuing a number of corporate options to strengthen its balance sheet and provide working capital. These negotiations are at an advanced stage but the outcome is not yet certain,” Albidon stated.

The company further stated that it was in discussions with Jinchuan - a Chinese company that purchases the nickel produced from the Munali project - and other stakeholders over the performance of the mine.

“Ongoing discussions with key stakeholders including contractors, suppliers, lenders, Jinchuan, the Zambian government, local community and major shareholders are being held,” it stated.

Albidon added that Jinchuan had been advised of the reduced nickel off-take, particularly in 2009, and the need to waive certain minimum delivery obligations by the company.

“Senior and subordinated lenders have been briefed. The result of the revised mine plans is that the company will be in breach of its loan covenants and therefore waivers and concessions have been requested. Our lenders are in the process of assessing the impact of the revised mine plan and while expressing willingness to work with the company, they are reserving their right,” it stated.

Albidon also revealed that meetings had been held with the Zambian government aimed at providing assistance to the Munali project.

And Albidon stated that further restructuring of the Munali nickel project operations targeting significant cost reductions would be undertaken in order to render the project a viable concern at current nickel prices.

“This includes assessing the option to cease stopping operations during 2009 and to only mine and process development ore on a campaign basis. This allows development to be accelerated while allowing the company the ability to substantially reduce its mining, processing and site overheads,” stated Albidon.

Labels: ALBIDON NICKLE MINE, JINCHUAN, MUNALI NICKEL MINE, NICKEL

posted by MrK @ 9:23 AM