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Kagara sees nickel mine start in 3 months

Publishing Date
11 May 2009 2:14pm GMT
Mining Journal
First production of nickel from Australia's Lounge Lizard deposit will start in three months, owner Kagara Ltd said on Monday after it reached a co-operation agreement with neighbouring Western Areas NL.

"We'll see production starting in about three months," Kagara executive Chairman Kim Robinson told Reuters.Initial production will total around 3,000t of contained nickel a year, though that could increase to 5,000t in later years by spending a further A$20 million ($15.3 million) on mine development, Mr Robinson said.

The agreement will result in consolidation of one of Australia's largest high grade nickel mines, containing around 140,140t of nickel in ore, Mr Robinson said. The agreement, which enables Kagara to make a quicker start to production from Lounge Lizard by accessing ore from a property owned by Western Areas, drove Kagara's stock up 19% to A$1.49 against modest declines in the wider market.

Kagara's ore will be treated at Western Areas' Cosmic Boy nickel concentrator, with concentrate to be sold into Western Areas' existing nickel offtake agreements. Western Areas has already agreed to supply the nearby Kalgoorlie nickel smelter owned by BHP Billiton Ltd up to 10,000t of nickel in concentrate each year up to a total of 75,000t.
   "We could have reached our own agreement with BHP, but this makes more sense," Mr Robinson said.

The potential to yield more nickel comes as a slew of closures occur in the sector in response to sagging prices for the stainless steel alloy. Nickel sells for around US$13,000/t (US$5.90/lb), compared with a record highs above US$51,000/t two years ago.

Mr Robinson said it would cost about US$4/lb to produce its nickel, providing a sufficient profit margin at current prices.

Kagara bought the Lounge Lizard deposit from Lionore Mining International, now part of Russia's Norilsk Nickel for A$25 million in December 2006. Until now, Kagara has focused mainly on zinc and copper mining. 

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