Geovic Mining Corp. will slash costs, reduce in scale and delay by at least a year its cobalt-nickel-manganese project in Cameroon as a result of the financial crisis, a company official told Reuters on Friday.
The firm's Nkamouna project, a key element in Cameroon's drive to attract $10 billion in investment into its nascent mining sector, is dependent on financing from U.S. banks which are increasingly reluctant to lend money.
Everything has been delayed by the financial crisis, said Eduouard Edmond Bateky, deputy managing director of Geovic Cameroon, Geovic's 60 percent owned subsidiary.
The problem is that the main financial sponsors are U.S. banks. We will now have to have something more simple, with less added value here, Bateky told Reuters.
Bateky estimated that investment in the project would be scaled back to $250-300 million, down from an original cost of $400 million that was reduced to $370 million.
Provided everything clears, we are looking at one year's delay ... The project is still profitable. The economies are still robust but not as profitable as it was supposed to be.
A second feasibility study is needed for the project and the firm will cut in-country processing, he said.
PRICES CRASH, OUTLOOK BLEAK
Construction was due to begin this year with mining starting in 2010. Geovic expects to produce 4,200 tonnes of cobalt and 2,100 tonnes of nickel annually for at least 21 years from the deposits which it estimates at 52 million tonnes of ore.
This would make Geovic the one of the world's biggest producers of cobalt, a hard and durable metal used in aircraft engines and increasingly in batteries for hybrid cars.
The project originally intended a chemical treatment plant in Cameroon but Geovic is revising its plans, with the new feasibility study due to be completed by July or August.
Although the Nkamouna site in eastern Cameroon is also rich in nickel and manganese, Bateky said it was cobalt-driven.
Prices of high-tech metal cobalt have crashed to around $15 per lb from last year's highs of over $50 per lb, and the outlook for demand is bleak.
The project is profitable at $8 per lb but at $12 we still have some room, Bateky said.
Cameroon, long a major oil producer in the Gulf of Guinea, has seen its oil revenues fall in recent years. Current production levels are around 90,000 barrels per day.
The Nkamouna project is central to Cameroon's IMF-backed plans to boost non-oil revenues in a country that analysts say is not realising its vast economic potential.
Last year Cameroon said that it hoped to attract some $10 billion in mining investments in the coming years, but the Nkamouna project has joined a list of other mining developments curbed by the financial crisis. (Writing by David Lewis; Editing by Daniel Magnowski and Jason Neely)
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