News & Analysis

European Nickel Plc (ENK: AIM) review and analysis

By PSQ Analytics

European Nickel Plc (European Nickel) identifies, acquires, develops and exploits nickel-cobalt deposits internationally. The company has developed a low cost, heap leach process for the extraction of nickel from nickel laterites which it plans to commercialise at its flagship project in Turkey. It also has operations in the Philippines and Albania. On 2 Feb 2010 the company announced a merger implementation agreement (MIA) to acquire Rusina Mining NL's entire issued share capital in an equity-based transaction and the raising of USD19.4 mn. The combined group will have a total attributable resource base of 1.35 mn tonnes of contained nickel, with a medium term nickel production target of 50,000 tonnes per annum. Its 2 key projects are:

Caldag Project: The company is currently focused on this flagship project in Turkey, following attainment of a Forestry permit in Feb 2009. The mine has a JORC proven reserve of 33.2Mt @ 1.13%Ni, containing 375,160t contained nickel. The company aims at 256,500t Ni production over a life span of 14 years with a production target of 20,000tpa Nickel and 1,000tpa Cobalt. First production is expected to commence 13 months after construction is completed. Total cost of the project is estimated to be USD428 mn, of which the company has already invested USD78 mn, with the rest to be financed by a USD350 mn debt facility. Progress at the project depends on the completion of the conditional financing framework agreement signed in Dec 2008 with its Chinese partners. For arranging a credit guarantee insurance policy for the Caldag project finance facility, which will facilitate the funding from a consortium of predominantly Chinese banks, China Tianchen Engineering Corporation (TCC) will receive a 2% interest in the Ca dag project and will be appointed its Engineering, Procurement and Construction (EPC) contractor. Jiangxi Rare Earth and Rare Metals Tungsten Group Co. Ltd. (JXTC) will purchase a 20% equity interest in the Caldag project for USD20 mn and will buy all its nickel production. The debt facility and transfer of equity remain subject to agreement, expected now to come into effect in the next few months.

Acoje Project: This is the next planned heap leach project for commercialisation, with a JORC indicated reserve of 34.1Mt @ 1.09%Ni, containing 371,700t contained nickel. The company expects to produce 24,500tpa Nickel with a capital cost per annual pound of Nickel of USD7.84. European Nickel currently has a 20% interest in the project, with a right to earn up to 40%, while Rusina currently has a 72% interest in the project.