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African Rainbow Minerals to acquire Norilsk Nickel Africa

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Major Russian nickel producer, Nornickel, through its South African subsidiary, Norilsk Nickel Africa proprietary Limited (NNAf), has entered into a definitive agreement with African Rainbow Minerals (ARM) to transfer its 50% interest in the Nkomati mine for a total cash consideration of ZAR1M (US$53,000).

According to the terms of the agreement, ARM will take over the environmental liabilities of the Nkomati mine, together with NNAf’s proportionate share of the obligations and liabilities relating to the mine’s assets. This will be associated with a ZAR325M (US$17.2M) contribution from NNAf, which may be adjusted under the terms of the agreement. The transaction is expected to close during 2024 subject to the necessary South African regulatory and competition authorities’ approvals and certain other conditions precedent as agreed between NNAf and ARM.

Nkomati is a polymetallic sulphide mine located in the Mpumalanga Province in South Africa, 300km east of Johannesburg. The mine was placed on care and maintenance in March 2021 after resources became uneconomic due to low nickel prices. Whilst it was operational, the mine adopted open pit mining methods – truck and shovel/loader and a mechanised cut and fill. It had been South Africa’s only producer of nickel concentrate, which also contained copper, cobalt and PGMs. This concentrate was then sold by Nornickel to third parties. During 2020, the mine’s final year in operation, it produced 11.6kt Ni-, 5.8kt Cu, 26koz Pd-in-concentrate. Nkomati additionally produced chrome concentrate.

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For Nornickel, the move is supported by its plans to focus on developing its Russian resource base. While for ARM, Nkomati represents a known and predictable nickel sulphide orebody with established infrastructure, low capital intensity and the benefit of bi-metal product credits. In March 2022, ARM’s ex-CEO, Mike Schmidt, suggested that the company was considering options regarding underground mining at Nkomati, confirming that going underground was “under study.” However, by September 2022, amid soaring nickel prices, Schmidt stated that he was not convinced by the long-term sustainability of such high nickel prices, acknowledging the high-cost of mining the remaining low-grade ore underground. Nickel’s price performance this year justifies such caution.

 

Source: Project Blue

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