Western Areas to acquire Glencore nickel operations

Western Areas will acquire Glencore’s Australian nickel operations in Western Australia.

The acquisition will cost approximately $24.5 million, with $11.5 million payable at close, and two deferred payments of $7 million and $6 million at the nine and 18 month market after closing the deal.

The deal comprises the Cosmos Nickel Complex (CNC) and the already explored Odysseus deposits, representing the last holding Glencore had in the Jubliee operations.

Operations were suspended at Cosmos a number of years ago, although exploration drilling did continue at Odysseus, which Western Areas has described as “one of Australia’s most significant undeveloped nickel deposits”, and has  JORC resource of 7.3 million tonnes @2.5% nickel containing 174,000 tonnes of nickel.

The deal also includes a 450 ktpa throughput concentrator, a brand new SAG mill, a 500 bed accommodation village, and other miscellaneous items such as offices, supplies, and an airstrip.

These assets are located less than 30 kilometres north of BHP’s Leinster nickel operations.

Commenting on the acquisition, Western Areas managing director Dan Lougher said it is in-line with the miner’s current growth strategy.

“The Cosmos Nickel Complex will complement our existing Forrestania nickel operations, and is an excellent, prudent and low cost investment which is consistent with our brownfields acquisition strategy,” Lougher said.

“We believe we have acquired the project at the correct stage of the current commodity cycle.

“We’ve now significantly increased our exposure to upside via substantial additional high quality development and exploration opportunities as the nickel market is expected to move into a tighter demand and supply balance over the coming years.

Xstrata initially bought the Jubilee suite of operations, which included Cosmos and Sinclair nickel mines, in late 2007 for $3.1 billion, as nickel reached a historic peak, and created a bidding war for high quality nickel operations.

At the same time BHP spent around $6 billion opening the Ravensthorpe nickel operation.

However following this acquisition the price crashed, and nickel bottomed out, causing BHP to write-down approximately $5.16 billion on Ravensthorpe, selling it to Canadian miner First Quantum for around US$340 million.

After Glencore’s acquisition of Xstrata, it began selling the Jubilee acquisition in a piecemeal fashion for just over $30 million, offloading the embattled Sinclair operation to Talisman Mining for $10 million in 2014, rounding out its exit with this latest divestment of CNC for $24.5 million.

Following this acqusition by Western Areas, the Murrin Murrin mine remains as Glencore's last nickel operation in the country.


Image: Mary Mills/ The Kalgoorlie Miner.

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