Two very significant announcements have come out from European Nickel, which has well advanced lateritic nickel projects in Turkey and the Philippines, over the past couple of days. The first was that it had received the necessary forestry permit necessary to allow development of its Caldag nickel project in Turkey, closely followed by news of financial guarantees from China - which were in reality dependent on the forestry permit being obtained.
As with many junior mining companies - particularly in the base metals sector - traditional areas of finance have virtually dried up over the past year for European Nickel , thus requiring a more radical solution if it was to get its flagship Caldag heap leach nickel project, on which it has already spent some $70 million, off the ground. As is being seen increasingly of late, an agreement signed with Chinese companies on offtake, engineering and finance is providing the company with the wherewithal to proceed to the next stage of project development.
What European Nickel has come up with is a framework agreement with Jianxi Rare Earth and Rare Metals Tungsten Group Company (JXTC) and the China Tianchen Engineering Corporation (TCC) to fund the development of the Caldag mine. TCC will lead the provision arrangement of a credit guarantee insurance policy for up to $350 million and will ‘facilitate the funding to be provided by a consortium of predominantly Chinese banks'. When this arrangement s completed, which is expected to be within the next three to six months, TCC will be appointed the EPC contractor for Caldag - and will also be European Nickel's preferred EPC contractor for nickel projects over the next five years (which should encompass the development of the company's Acoje and Berong projects in the Philippines. TCC will also acquire, free of charge, a 2% interest in Caldag.
Meanwhile JXTC has undertaken to acquire a 20% equity interest directly in the Caldag project (subject to approval of the Jiangxi Provincial Government and associated agencies.) JXTC is also conditionally agreed to buy all of Caldag's second nickel mixed hydroxide product (or about 50% of the mine's nickel/cobalt output) at market related prices. Originally the mine's output had been committed to BHP Billiton, but European Nickel says that BHP will still take the remaining 50% of output and has indicated to the company that it is prepared to grant a release of the output now scheduled for JXTC.
Speaking to Mineweb today, Simon Purkiss - European Nickel's Managing Director - said that although there do seem to be several hurdles still ahead all the indications are that the process will indeed be achieved within the timescale anticipated with things moving far faster in China than would be normal in the West. He feels that now the momentum is well under way to get European Nickel's projects into production with final development of Caldag to start by the end of the year - and then be followed by Acoje , Berong and then perhaps Devolli in Albania.
Caldag itself has a resource of some 33mt of 1.13% nickel and plans to use a well developed sulphuric acid heap leach process with a recovery, according to Purkiss, in the high 70 percents. It is scheduled initially to produce 20,400 tonnes a year contained nickel and 1,000 t/y cobalt with a 14 year mine life. As well as the mine itself, the company plans to build its own sulphuric acid plant which will also generate its own power and supply surplus power to the Turkish grid.
It does seem that the latest financial agreements do set European Nickel on track toward first nickel production in 2010.