VANCOUVER — Despite a resurgence in nickel prices — which hit a 14-month high on April 18 — it looked like junior Anfield Nickel (TSXV: ANF; US-OTC: ANCKF) was going to have trouble footing the US$950-million development bill at its Mayaniquel nickel–laterite project, 100 km west of the Guatemalan port city of Puerto Barrios.
Anfield advanced Mayaniquel since it acquired the project in 2009 from BHP Billiton (NYSE: BHP) for US$2.5 million and a 1.5% net smelter return royalty. The junior released a prefeasibility (PFS) study in October 2012, and scored the first of three exploitation licences in mid-2013 from the Guatemalan Ministry of Energy and Mines.
Mayaniquel would need staged licences, since it is composed of a 121 sq. km area within the nickel–laterite belt surrounding Lake Izabal, 250 km northeast of Guatemala City. Anfield acquired a 25-year exploitation permit that covers the project’s Sechol area.
The company submitted two more exploitation-licence applications to the Ministry of Energy and Mines in August 2012, and submitted environmental-impact assessments to the Ministry of Environment for the Tres Juanes and Amanecer licence areas two months later.
But with cash dwindling and a looming impairment charge on Mayaniquel, it looked like Anfield was running low on options. The company reported at the end of 2013 that an US$18-million impairment provision was recorded against the project’s carrying value, and that its cash and equivalents totalled just $332,600 in December. Anfield was also scheduled to owe US$5.5 million in debt repayments to shareholder Ross Beaty’s Lumina Capital by the end of June.
In response Anfield announced Mayaniquel was on the block on April 15, and nine days later had a deal with integrated Dutch outfit Cunico Resources, which accounts for almost 10% of the global ferronickel market. Under the agreement Cunico will acquire Anfield’s Guatemalan subsidiary, with the value determined by a formula that ties into average nickel prices.
Payment will be made in five annual US$3-million installments totalling US$15 million, with a final US$28-million payment due on the fifth anniversary of the closing date, subject to adjustment based on the following formula: (year-five average nickel price / US$14,000 x US$43 million) - US$15 million.
For example, if the average nickel price in the fifth year after closing is the deal-time price of US$18,364 per tonne, the final payment would be US$41.4 million and the total purchase price would be US$56.4 million.
Cunico made the move into Latin America in 2012, when it acquired Guatemalan nickel group Guaxilan, which held several exploitation and exploration tenements in the Cerro Colorado region that contained a lot of mineable, high-grade saprolite nickel ore.
Anfield’s PFS models an open-pit operation at Mayaniquel that would mine 3.3 million tonnes of lateritic ore per year over a 22-year life. Around 24% of the mined material would be sent to the processing plant, and the rest shipped to an upgrading plant that would reject low nickel grade and high iron material, and provide the processing plant with an average feed grade of 1.68% nickel over life-of-mine.
Mayaniquel’s proven and probable mineral reserves total 70 million tonnes grading 1.41% nickel.
Assuming a base-case nickel price of US$8.50 per lb., the project’s net present value at an 8% discount rate would be $1.4 billion and the internal rate of return 19.9%.
Anfield’s shares have been in decline since mid-January, when they peaked at $2.47. At press time, shares were still halted in relation to the sale news, having closed at 99¢ before the halt, near the bottom of a 52-week range of 90¢ to $3.70.
The company has 43 million shares outstanding.
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