New Century to buy New Caledonia Goro nickel mine from Vale
New Century will effectively be paid to take Vale's troubled Goro nickel mine in New Caledonia off the Brazilian miner’s hands.
Taking on Vale’s troubled Goro nickel mine is a considerable risk, New Century Resources boss Pat Walta admits, but says the risk is worth the potential return to the emerging zinc and nickel producer.
New Century will effectively be paid to take Vale’s troubled Goro nickel mine in New Caledonia off the Brazilan mining giant’s hands, in a deal that could cost Vale and the French Government close to $1bn.
But it will free Vale of the troubled mine, which cost more than $US4.5bn to build and has been bleeding cash at a rate better than $US100m a year ever since - it lost $US1.6bn between 2014 and 2016 alone, and is estimated to have cost Vale more than $US9bn since work on the project began – and hand New Century a simplified operation chief executive Pat Walta says can be turned into a moneymaker for the company.
New Century announced a 60 day exclusive negotiating period to the market on Tuesday and, although the deal is far from done, Mr Walta said the opportunity is enormous.
“Nothing is without risk, of course, but we are in the business of taking on risk and we’re going into this with our eyes wide open,” he said.
“We’ve still got a whole mountain of due diligence to do. But the reality is this is a sunk capital opportunity. We adopt a philosophy of if you’re going to be acquiring and developing mines, you want to be acquiring them after the first tonne is produced.
“Because the first tonne is the hardest tonne to produce - all of the permitting risk, the construction risk, the design and development risk. The second and third tonne is easier to produce.”
It is likely the New Century will walk away from the transaction with significant cash from Vale, and potentially the forgiveness of the remains of a $US200m project financing loan extended by the French government to keep the project going in 2016.
Vale is in the process of shutting Goro’s nickel oxide refinery, the source of much of the project’s troubles according to Mr Walta, and last year announced a $US500m plan to decommission the refinery and simplify the operation to include mining and high-pressure acid leach processing to produce a mixed nickel and cobalt hydroxide product.
Cash to continue that process will be a part of any deal cut to offload Goro, as will the removal or the assumption by Vale of the French financing arrangement.
The deal will also partly hinge on winning permission from the New Caledonia government to extend the project’s permission to export direct shipping ore beyond 2021, with legislation set to hit the country’s Parliament in June.
New Century will be left with an operation similar to that of Glencore’s Murrin Murrin nickel mine in WA - a shallow nickel laterite deposit, including two types of ore (limonite and a higher-grade saprolite ore), a high pressure acid leach (HPAL) circuit to produce a concentrate.
The saprolite ore, which Mr Walta says has been one of the major sources of Goro’s problems since it was commissioned in 2011, will be exported directly to offshore processing plans.
And while the New Century boss concedes that the remaining HPAL operation is still a complex metallurgical process, he says it is now a well understood technique in use at similar deposits in New Caledonia and across the world.
Goro was designed to produce about 58,000 tonnes of refined nickel products a year, but has never lived up to its potential due to ongoing problems with keeping the refinery operating at nameplate capacity.
It produced about 23,400t of nickel products in 2019, and 8000t in the March quarter.
New Century also operates the Century zinc mine in north Queensland, acquired from MMG in 2017 and returned to production as a tailings processing play in 2019.
Vale confirmed the talks in a statement on Tuesday, saying the potential sale of the asset would trigger a further $US400m impairment of the asset - effectively writing its valuation of Goro to nothing, given the Brazilian major put a $US404m carrying value on the asset as at December 31 after taking a $US2.5bn hit on their value in 2019.
New Century shares closed down 2c to 23c on Tuesday.
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