Implats buys into Dynatec's Madagascar nickel find

JOHANNESBURG (Reuters) - South Africa's Implats plans to take a stake in Dynatec Corp.'s Ambatovy nickel and cobalt project in Madagascar by funding a portion of the development costs of the large venture, the companies said on Thursday.

The partners will initially each own half of the $2.25 billion project on the lush Indian Ocean island, but this will be cut to 37.5 percent apiece because of the planned sale of a 25 percent stake to a third shareholder.

"Discussions are currently advanced with prospective third partners," Implats and Dynatec said, adding that the new participant was likely to be a nickel consumer.

Dynatec, a small Toronto-based mining firm, has been looking for partners to help finance the early-stage project, which has the potential to produce 60,000 tonnes of nickel and 5,600 tonnes of cobalt per year at a low cost.

Nickel, a shiny, silvery metal used mostly to make stainless steel, has been in short supply for the past two years leading investors and market analysts to pay close attention to new discoveries and projects.

Dynatec's share price surged on the Toronto Stock Exchange, adding 18 Canadian cents, or 15 percent, to close at C$1.40 on Thursday.

The partners said a proposal to locate a refinery in South Africa, near the existing operations of Implats, could cut the estimated $2.25 billion capital cost of the project.

Implats is the world's second-biggest platinum producer.

In the initial phase, Implats will provide a maximum of $60 million in funding to modify a current feasibility study and for engineering work so a final decision can be made on going ahead with the project by the end of 2005.

Implats will also contribute $50 million toward Dynatec's share of equity contributions. After that all parties will be required to contribute their proportionate share.

Dynatec will, however, get all of the payment or financial support from a third-party purchase of a stake in the project.

Analysts in Canada have suggested that a producer of stainless steel in Asia, where nickel demand is most acute, or a major trading house like Mitsui & Co. or Mitsubishi Corp., could be possible candidates.

Senior project debt funding will be sought for at least half of funding requirements, the firms said.


Fri May 27, 2005 8:23 AM GMT+02:00 - Reuters South Africa - Johannesburg,South Africa

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