Finance deal close for giant $4.5 bn nickel project

By @ibtimes on

Sherritt International (S.TO: Quote) is on the verge of closing a financing agreement with its partners on the $4.5 billion Ambatovy nickel project in Madagascar, Chairman and acting Chief Executive Ian Delaney said on Thursday.

Speaking to reporters after the company's annual shareholder meeting in Toronto, Delaney said he hoped to announce a deal within a month.

It's in the papering process, he said.

Ambatovy, owned 40 percent by Sherritt, is expected to one day produce 60,000 tonnes of nickel a year.

The Toronto-based company, which also operates in Cuba and Canada, said in February that the project's construction costs had ballooned to $4.5 billion, forcing it to seek alternative funding options to finance its share. Financing of $2.1 billion is already in place.

Sherritt's partners in the project are Japan's Sumitomo Corp SUMTMS.UL, Korea Resources Corp, and Canada's SNC-Lavalin (SNC.TO: Quote).

Delaney, who has been acting as Sherritt's CEO since Jowdat Waheed took a leave of absence in January, would not give details of the agreement.

Shares of the company, which also produces oil, gas and coal, were down 12 Canadian cents at C$5.00 on the Toronto Stock Exchange on Thursday.

Construction of Ambatovy was slowed last fall due to weak nickel prices, but Delaney said it is now running full tilt and more than half done. It is on pace for commissioning in the final quarter of 2010, he said.

Company officials have been working to reduce Ambatovy's construction cost, but Delaney wouldn't commit to predicting a reduction.

Optimistically yes, but we're we're absolutely determined that the number's not going to go up, he said.

Nickel MNI0 was at $5.55 a pound on Thursday, up from a trough of about $4.15 a pound hit in December, but down from its peak of nearly $25 a pound hit in May 2007.

Sherritt also produces nickel from the Moa project in Cuba, where costs amounted to $4.12 a pound in the first quarter, when factoring in cobalt production as an offset to mining costs.

Delaney said costs at Ambatovy should be as cheap or cheaper than at the Cuban operations.

Sherritt officials said the recent political crisis in Madagascar -- in which Andry Rajoelina seized power in March from former president Marc Ravalomanana -- has had no impact on the progress of the project or the company's personnel.

($1=$1.14 Canadian) (Reporting by Cameron French; editing by Peter Galloway)

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