Tati Nickel's P12 million exploration could extend lifespan

MBONGENI MGUNI
Staff Writer | Friday November 26, 2010 00:00

 

Established in the 1980s, Tati Nickel Mining Company (TNMC)'s Phoenix and Selkirk mines are running out of steam, annually pumping out about 19, 000 metric tonnes of nickel. The high volumes out of the mines have positioned TNMC as Norilsk Nickel's most profitable business outside its Russian and European assets.

This week, TNMC General Manager, Sebetlela Sebetlela told BusinessWeek that the P12 million budget would cater for exploration activities this year and the next. He said studies would focus on assessing the quality and quantity of mineral available in the ground under exploration.

'The most important issue is that we have been able to secure exploration leases from the areas around the mine that were held by other people, but have since become available,' he said.

'In terms of our intentions, we have a budget that we have earmarked for this and next year which has already become available for us. We are in the planning phase about where to start and the activities to be done, then we will take the process further.'

He said the pace and intensity of exploration would be determined on an ongoing basis by results of drilling and assaying.

'Our exploration and scope of work will be determined by what we find as we go and we can increase this based on what we find, but if there's nothing, we'll go home empty-handed.

'We are also looking at what information is available in the areas then, with that, plan the activities.'

Sebetlela said it was premature to say whether the exploration activities would lend years to TNMC's lifespan.

Should the studies fail to contribute to the nickel mine's life, TNMC would likely embark on various decommissioning activities to wind the two mines down.

Any further exploration activities would require prospecting licences and funding, the latter likely to be provided in part by Norilsk Nickel which owns 85 percent of TNMC. The Russian giant has stressed its commitment to a longer lifespan for Tati Nickel.

'Norilsk plans to start exploration near its Botswana operations where deposits have as few as five years of mining life left,' said Norilsk Deputy CEO, Oleg Pivovarchuk earlier in the year, adding that TNMC had come out tops in the assessment of viable operations outside Russia and Europe.

Funding for further exploration will also come from the buoyant nickel prices, which rose from approximately US$8 per pound last November, to more than P12 per pound by April 2010. On Wednesday, prices were P9.81 per pound. Economists expect nickel prices to continue upward, driven by demand from China and India, while other developed economies are expected to show increase in purchasing power on easing economic tensions and stable environment. Metals consultants, CRU, expect nickel prices to increase next year to US$11.30 per pound and US$11.90 per pound in 2012. However, there are fears that these projections could be undone by growth in nickel pig iron output, which can be cheaper to produce than traditional nickel metal. Nickel pig iron threatens to tip the global nickel market into oversupply over the next few years, forcing prices down and hurting primary nickel producer such as TNMC.