Albidon Ltd said on Tuesday it has suspended mining operations at its Munali project in Zambia due to low nickel prices, and plans to cut about 350 jobs.
Albidon shares, which were suspended on Feb. 26 as the company sought to raise funds, dropped as much as 53 percent when they resumed trading on Tuesday. At 0958 GMT, the shares were down 33 percent at 3 pence in London.
Albidon said it has received a conditional financing proposal from its largest shareholder, Jinchuan Group Ltd, but its ability to continue was subject to the completion of the deal.
We are placing our target price under review until we have more certainty on the composition and completion of the Jinchuan funding and therefore the future potential to restart the operation, said Numis Securities in a research note.
Albidon would receive $1.8 million as an accelerated payment for nickel concentrate, $7 million in equity before March 20, and a later convertible note, under the proposed funding from Jinchuan.
Shares in Albidon were suspended last month after the company said a $26 million financing deal with equity fund Pacific Road Resources Funds was unlikely to go ahead.
Ore production at Munali in the first two months of 2009 was 74,000 tonnes, below the forecast 87,000 tonnes, mainly due to a lack of equipment and lower grades.
Albidon said limited development activities may restart at the mine so that production levels greater than 900,000 tonnes a year can be readily achieved when nickel prices improve.
Nickel prices on the London Metal Exchange have dropped about more than 80 percent to below $10,000 a tonne from a record high of $51,800 a tonne in May 2007 as demand from stainless steel producers has slumped.
(Reporting by Julie Crust; editing by Rupert Winchester)
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