Goro Nickel Headed for 2007 Startup

Goro Nickel Headed for 2007 Startup

Leading Developments

In an Oct. 19, 2004 conference call, Inco announced plans to proceed with construction of the Goro laterite nickel project in New Caledonia, reported very strong third-quarter profits, and outlined expectations that nickel prices will remain strong for several more quarters, though current prices levels cannot be sustained over the long term.

The construction schedule for the Goro project now calls for initial production in September 2007 from a plant designed to produce 60,000 metric tons per year (mt/y) of nickel and 4,300 to 5,000 mt/y of cobalt. Ramp-up will stretch across two years, with the plant scheduled to reach 75% of capacity after one year of operation and 90% of capacity after two.

Announcement of plans to proceed with construction at Goro were underscored by Inco’s report of adjusted net earning of $212 million during the third quarter, up more than ten-fold from $20 million earned during the third quarter of 2003. Inco’s cash balance at the end of the quarter stood at $869 million.

Cash LME nickel prices during the third quarter averaged $14,000/mt, the fourth highest quarterly average nickel price ever. For the full year 2004, Inco expects to produce 505 million to 510 million lb of nickel, 265 million lb of copper, and 405,000 oz of platinum group metals, at an average cost of $2.25 to $2.35/lb of nickel, after byproduct credits.

Go-Ahead for Goro: Inco’s decision to proceed with the Goro project followed completion of an intensive Phase 2 review of the project. Pending completion of the review, Goro had been placed on hold in December 2002 as a result of escalating projections for project capital costs.

Capital cost for the Goro project is now estimated at $1.878 billion, within a minus 5%, plus 15% reliability range. Cash costs of operation per pound of nickel produced are estimated at $1.10 to $1.15/lb after byproduct credits and based on $3.00/lb nickel and $7.00/lb cobalt. The mine plan has been optimized for nickel, and cobalt production will vary significantly over the life of the mine due to grade fluctuations.

The Goro metallurgical process was unchanged by the review, which sought to optimize design and engineering, while focusing on constructability, operability, maintainability, and risk mitigation. The plant footprint area was reduced by 50%. Water supply will be via a pipeline from the Yate reservoir, eliminating the need for a previously planned reservoir near the plant.

A modularization strategy calls for Goro plant modules to be built at various sites in the Asia Pacific region for delivery intact to the project site. This strategy will reduce the peak workforce at the site and provide better control over quality and scheduling.

A 100-megawatt, oil-fired steam and power plant, to be built next to the processing plant, will be owned and operated by Prony Energy, and will be linked to New Caledonia’s grid. Half of the plant’s generating capacity will be dedicated to the Goro project and the rest to the growing needs of New Caledonia.

Parts of the Goro project-such as the power plant, the port, and the mine-will operate for some time prior to plant commissioning. The three process autoclaves will be commissioned successively in September, October, and November 2007.

Project management and execution will combine participation by Inco personnel and a joint venture of Foster Wheeler and SNC Lavalin. In addition to the permanent local workforce, a team of up to 100 professionals will assist in the start-up and remain with the project as an overlay team until it is running consistently.

In addition to finalizing project design and scheduling, Inco has firmed up financing commitments and participation in the Goro project by minority partners. The government of France is committed to supplying at least $350 million in low-interest financing and will also provide financial support for construction of the power generating plant. The three provinces of New Caledonia have agreed to acquire the 10% of the project now owned by the French government agency BRGM, while Sumitomo Metal Mining and Mitsui have signed a memorandum of understanding leading to their acquisition of a 21% interest in the project. At completion, equity interests in the Goro project are expected to stand at 69% Inco, 21% Sumitomo/Mitsui, and 10% the provinces of New Caledonia.

Copyright Mining Media Nov 2004

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