LionOre Mining International Ltd, a Canadian nickel producer, said it will choose by November one of six banks from which to borrow $300-million to finance almost half the cost of a planned refinery in Botswana.
The company, based in Toronto, last month received approval from Botswana to build the $620 million nickel plant at its Tati mine. About $320-million will come from cash holdings, and the rest will be borrowed, Managing Director Peter Breese said in an interview from Johannesburg.
“We thought it would be prudent to raise about $300-million. There are six banks, both local and international, in line for this. We’ll go with a single one,” Breese said.
LionOre’s proprietary Activox technology allows it to mine deposits that were previously deemed to contain insufficient concentration of the metal. Aside from three deposits of its own that it will develop, the company plans to exchange rights to Activox for stakes in additional deposits, to help raise output.
Prices for nickel, a key ingredient in stainless steel, have more than doubled this year. The metal for three-month delivery rose to a record $29,950 a ton on August 22, and is currently trading at $29,100 a ton in London.
Higher metal prices have spurred mergers and acquisitions among the world’s biggest mining companies, with more than $100-billion of takeovers this year.
Inco Ltd, Canada’s largest nickel producer, is being acquired by Brazil’s Cia Vale do Rio Doce, the world’s largest iron ore producer, while Falconbridge, Canada’s No. 2 nickel miner, is being bought by Zug, Switzerland-based Xstrata Plc.
Shares of LionOre fell 2 cents, or 0,3 percent, to C$6,75 last night in Toronto, taking their gain this year to 37 percent. The company has a market value of C$1,47-billion ($1,3-billion).
“The market’s waking up to the fact that in a month there’ll be no more Inco,” said David Davidson, an analyst at Paradigm Capital Inc in Toronto who rates the stock a “buy”. “If investors are looking for a pure-play nickel company, LionOre is pretty much it.”
Nickel production from Tati, LionOre’s 50 percent-owned Nkomati mine in South Africa and the Honeymoon Wells project in Australia will be 90,000 metric tons a year by 2012, Breese said.
The Botswana operation will produce 22,000 tons of metal a year by the third quarter of 2009. After an evaluation, the company will decide whether to raise Nkomati’s annual production to 22,000 tons and to dig a 45,000 ton mine in Australia, Breese said.