05/12/2008 - 09:51

Albidon reviews Munali nickel mine

05/12/2008 - 09:51

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West Perth-based Albidon has joined the growing list of miners reviewing their operations, following recent substantial falls in commodity process.

West Perth-based Albidon has joined the growing list of miners reviewing their operations, following recent substantial falls in commodity process.

The nickel miner said it is undertaking a review of its Munali operation in Zambia, which has been experiencing delays in production ramp up since the mine came online in July this year.

The company was targeting nickel production of between 10,000 tonnes and 10,500 tonnes per year.

According to base metals specialists Kitco, the 60-day delivery price of nickel was trading at around $US4 per pound, down from about $US6.50/lb in early October.

Albidon today said the reduced output combined with lower nickel prices has resulted in shortages of working capital.

"Additional working capital finance has been raised through the combination of hedging close out, debt restructuring and recent equity placement," Albidon said in a statement.

"It is forecast these funds will allow the mine adequate working capital to ramp up to full production, based on the current mine plan and nickel prices forecast.

"Management is currently working to increase ore tonnages and grade as quickly as possible."

In September, Albidon closed out its hedge book of 11,294 tonnes of nickel, generating net proceeds of $US50 million. Last month the company secured $US16 million.

Albidon added that it was also reviewing cost cutting measures in non-essential expenditure.

The company stressed that it was not aware of any fundamental problems with the Munali mine resource or operating plant.

"These issues have been addressed and mine performance is improving significantly, though remains behind schedule," Albidon said.

"A more detailed update will be provided as soon as these reviews are complete."

Earlier this week, Albidon managing director Dale Rogers stepped down on mutually agreed terms.

Shares in Albidon dropped 0.9 cents to 8.7c at 11:30 AEDT.

 

The announcement is pasted below:

 

The board and management are undertaking a review of the Munali Nickel Mine following recent falls in the nickel price and delays to the mine ramp up.

Of primary importance are the issues of lower than forecast mine production and the impact of operating margins due to lower than expected nickel prices.

The reduced output combined with lower nickel prices resulted in shortages of working capital. Additional working capital finance has been raised through the combination of hedging close out, debt restructuring and recent equity placement.

It is forecast these funds will allow the mine adequate working capital to ramp up to full production, based on the current mine plan and nickel prices forecast.

Management is currently working to increase ore tonnages and grade as quickly as possible. A major review of costs and reduction in non-essential expenditure is also in progress.

Other than the issues outlined above we are not aware of any fundamental problems identified with the mine resource or operating plant. The issues affecting the mine performance to date relate solely to management of the mining. These issues have been addressed and mine performance is improving significantly, though remains behind schedule.

A more detailed update will be provided as soon as these reviews are complete.

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