No discussions have taken place between the government of the Philippines and Falconbridge since James paid a visit to the operation a couple of weeks ago, he told The Northern Miner.
After a 5-day tour of the laterite nickel plant, James concluded that the $500 million it would take to match other bids and put the project back into production is prohibitively high for his already debt- ridden company.
“We didn’t have a high enough degree of certainty on metal prices,” he told The Northern Miner. “We decided not to bid.”
Before the Feb 2 bidding deadline, a $350-million offer made by a subsidiary of Australian Bond Corp. was rejected by the Filipino government. Singapore-based Gulf Sea Services also offered $352 million for the plant. But the bid was also rejected by auction organizers.
James refused to say whether or not he is still interested in the project. But even if the Falconbridge chairman decided to negotiate directly with the Filipino government, he could be making a big mistake according to some industry observors.
Political instability in the Philippines and the $200-million needed to bring the open pit project back into production makes Nonoc an “iffy” situation said Alan Ferry, a mining analyst with Prudential Bache of To ronto.
Located on Mindinao Island about two hours from Manila, the deposit contains an estimated 49 million tons grading 1.22% of laterite nickel.
Nonoc Mining and Industrial Corp. says the mine and refinery is capable of producing around 30,000 tonnes of nickel concentrates annually or 3% of world production. However, it produced only 15,000 tonnes of pure nickel in 1985 after peaking at 20,000 tonnes in 1980.
Commissioned by Sherritt Gordon (TSE) of Toronto, Nonoc was nationalized shortly after being brought to production in 1978 by Filipino businessman Jesus Cabarus through his company Marinduque.
It was hit by both typhoons and labor problems during a chequered history before being shut down due to low nickel prices.
“I wouldn’t touch it with a barge pole,” said a well placed base metal mining executive who declined to be identified.
James’ decision not to bid for Nonoc means that Falconbridge’s long-term debt position will remain at around $816 million for the time being.
The Filipino government hasn’t announced whether or not a third auction will be held.
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