British Columbia-based miner First Quantum Minerals Ltd. (FM.TO, FQM.L) Tuesday said it entered into a binding agreement with miner BHP Billiton Ltd. (BHP,BHP.AX) to acquire the Ravensthorpe Nickel Operation in Western Australia for US$340 million.
The project is located about 550 kilometres south-east of Perth. It is an open cut mine and hydrometallurgical process plant, which uses proven technology to recover nickel and cobalt to produce a mixed nickel cobalt hydroxide intermediate product.
First Quantum expects the project's average annual production of nickel metal to be about 39,000 tonnes for the first five years after recommencement of operations and an average annual production of 28,000 tonnes of nickel metal over the expected life of mine of 32 years.
The acquisition is expected to be finalized during the first quarter of 2010. The sale was reported earlier by the Australian Financial Review.
Ravensthorpe's development was completed in 2007, but operations were suspended in January after the LME nickel price dropped to as low as $8,810.00 per tonne in late 2008.
According to Philip Pascall, Chairman and CEO of First Quantum, "This project together with the recently announced commitment to build the Kevitsa project in Finland has the potential to make the company one of the world's leading nickel producers. We are committed to re-starting Ravensthorpe which we believe we can successfully achieve within a realistic timeframe."
Last month, First Quantum and Zambia-focused miner Kiwara Plc (KIW.L) said First Quantum would buy Kiwara in a cash and stock deal valued at about US$260.2 million through a scheme of arrangement
BHP Billiton said in a separate statement Wednesday that it signed an agreement to sell the Ravensthorpe Nickel Operation to First Quantum Minerals Australia Pty Ltd, a wholly owned subsidiary of First Quantum Minerals Ltd.
''In addition to the purchase price, First Quantum's proposal was compelling having regard to their financial and operational capability, and their offer's minimal conditionality and immediate acceptability,'' the company noted.
BHP Billiton's Acting President of Stainless Steel Materials, Gerard Bond, commented on the agreement, "This reflects the culmination of a thorough and exhaustive study into a range of future options for Ravensthorpe, which has delivered a positive outcome for BHP Billiton, First Quantum and the local communities of Hopetoun and Ravensthorpe. We will work with the new owners of Ravensthorpe to ensure an effective handover of the operation in the coming months.''
Additionally, the miner said it would reverse the previously recognised pre-tax impairment charges of an estimated US$630 million for the half year ended December 31, 2009 from June 30, 2009. This will be reported as an exceptional item.
While announcing the indefinite suspension of the Ravensthorpe Nickel Operation in January, BHP Billiton had said that it was likely that an estimated pre-tax charge of about US$400 million would be recognised in the second half of the 2009 financial year as exceptional item.
FM.TO closed Tuesday's regular trade at C$76.17, down C$3.83 or 4.79%, on 462,716 shares.
FQM.L closed the regular trade on Tuesday at 4,561.00 pence, down 29.00 pence or 0.63%.
BHP shares closed Tuesday on the NYSE at $72.70, down $2.17 or 2.90%, on 4.69 million shares.
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