Mwana Africa Mulls Nickel-Plant Debt Finance as Price Gains

May 14, 2014 6:29 am ET

(Updates with nickel price in 11th paragraph.)

May 14 (Bloomberg) -- Mwana Africa Plc, a producer of nickel, gold and diamonds, said it’s looking for debt financing to fund the reopening of a nickel smelter and refinery in northeastern Zimbabwe to benefit from rising metal prices.

Restarting the Bindura Nickel smelter and refinery, mothballed in 2008, requires as much as $25 million, half of which will come from debt financing, Caroline Mathonsi, a spokeswoman for the London-based company, said by phone on May 12. The balance will come from Bindura’s internal resources, she said. Mwana owns 76.3 percent of Bindura.

Nickel has surged 50 percent this year after three straight annual declines. This year’s best-performing metal, used in stainless-steel production, rallied after ore shipments were banned by Indonesia, the top miner. Zimbabwe’s nickel output climbed 78 percent to 14,058 million metric tons in 2013, according to the nation’s mines chamber.

“We are targeting restarting the smelter and the refinery 12 months after we secure the financing; we need to take advantages of higher prices,” Mathonsi said. Restarting the smelter would enable Bindura to save costs it currently incurs shipping concentrates to China, via the port in Durban on neighboring South Africa’s eastern coast.

“Immediately we can see the savings we can make if we can restart the smelter and the refinery,” she said.

Converting Refinery

Mwana Africa would also seek to raise an additional $12 million to convert the refinery to handle platinum group metals, she said. A commissioned study by engineering company Hatch Ltd. shows the conversion is possible. “The plant modifications to be made are quite minimal,” Mathonsi said.

Zimbabwe is putting pressure on the local units of the world’s biggest platinum producers, Anglo American Platinum Ltd. and Impala Platinum Holdings Ltd., to bid for the rights to build refineries. The government plans to ban exports of unrefined platinum by the end of the year in a bid to stimulate growth in the country, which has the world’s largest reserves of the metal after South Africa.

The pan-African mining group, with operations in South Africa and the Democratic Republic of Congo, wants to accelerate plans to bring its greenfield Hunters Road nickel deposit in central Zimbabwe into commercial production to benefit from higher prices, Mathonsi said.

Hunters Road

Work on a prefeasibility study at Hunters Road will start soon and exploiting the deposit will increase tonnages to be supplied to the smelter and refinery.

Hunters Road has a “high capital requirement” and “if nickel prices stays this good, we will develop this project on our own,” she said.

Nickel fell for the first time in seven days, dropping 0.7 percent to $20,863 a ton at 10:52 a.m. in London.

Mwana will likely develop the Hunters Road deposit before resuming operations at Shangani, an underground operation with low grades that was shut down in 2008 because of rising costs.

“Hunters Road is very important for volumes to the smelter, but the pecking order is smelter and refinery, Hunters Road and then we will probably look at Shangani,” Mathonsi said, referring to its mine in the south of Zimbabwe.