Tati Nickel fights to extend lifespan

MBONGENI MGUNI
Staff Writer | Friday March 12, 2010 00:00

Tati operates Phoenix and Selkirk mines which were established about 25 years ago, while Russian base metals giant Norilsk Nickel owns 85 percent of Tati and directs management strategy at the Francistown-based company.

The Botswana government holds a 15-percent stake in the company.This week, it emerged that with about five years of reserves remaining to keep TNMC viable, the Russian giant has decided to focus on exploration of new ground around the existing mines. Outside its Russian and European properties, Tati is Norilsk's most profitable business, pumping out 19 600 metric tonnes of nickel last year.

Norilsk Nickel Deputy Chief Executive Officer, Oleg Pivovarchuk, was quoted as saying Tati had come out tops in the assessment of viable operations outside of the flagship properties in Russia and Europe. Last year, Norilsk's Australian operations produced far less than Tati and require a nickel price of about US$23 000 to break even while the base metals price has averaged US$19 000 thus far this year.

'Norilsk plans to start exploration near its Botswana operations where deposits have as few as five years of mining life left,' Pivovarchuk said.

On Wednesday, TNMC General Manager, Sebetlela Sebetlela, told Business Week that the northern-based miner's future was largely dependent on market forces and how these impacted the base metal's price. He said the price of nickel would determine the availability of funds for mine life-prolonging exploration. 'Investment in exploration will be dependent on the sustainable recovery in the nickel market, although no specific budget can be stated at the moment,' Sebetlela said. 'Norilsk Nickel is as committed to the future of Tati Nickel as TNMC itself. Every opportunity to improve the life of TNMC will remain a common objective for both companies and exploration activity is an important part of this objective.'

Sebetlela revealed that following a bruising year on the mining landscape, TNMC, like other miners, had little resources for sustained exploration activities. In addition, previous partners such as the European Union had wound up their support, leaving TNMC to look to its future alone.

Tati Nickel's exploration coffers have previously benefited from the European Union's Economic Diversification of the Mining Sector Programme, which received an allocation of P840 million from the European Development Fund between 1991 and December 2009. The programme ended last December, with Tati Nickel and BCL Mine among the beneficiaries of funding. Sebetlela and the strategists at TNMC and Norilsk are thus banking on the price of nickel for room to prolong the mine. At the London Metals Exchange on Wednesday, nickel was trading just above US$21 940 per tonne, representing an upward trend seen since the third quarter of 2009.

With nickel stocks declining at the London Metals Exchange (LME) and the global economy recovering, analysts expect nickel prices to rise in the short-term, possibly enabling TNMC to resume exploration activities around Phoenix and Selkirk.

Nickel has risen over 15 percent in value this year and is two-and-a-half times more valuable than at its lowest point in the fourth quarter of 2008. Recently, a Reuters poll of analysts forecast an average LME cash nickel price of $18,185 per ton in 2010, rising to $19,069 a ton in 2011.

However, demand from China and the recovering super economies of the US and Europe is expected to push the price of nickel above the figures expected by Reuters' analysts.