[Ferro-Alloys.com] Australian nickel projects, presumably deemed non-core businesses, by mining majors BHP Billiton, and Norilsk Nickel are either reportedly up for sale, or sales have been agreed, which will see some of the country’s nickel production, or potential output move into the hands of new ownership.  Australia was the world’s fourth largest nickel producer (after the Philippines, Indonesia and Russia) in 2012.

BHP Billiton, which had previously sold off its Ravensthorpe nickel mine and metallurgical plant to First Quantum back in December 2009 for $340 million – having cost over $2 billion to build - is now looking to sell the rest of its Western Australian nickel operations which come under its Nickel West banner, comprising the Mount Keith Nickel mine, Leinster Nickel mine, Kambalda Nickel concentrator, Kalgoorlie Nickel rmelter and Kwinana Nickel refinery.  There are reportedly six major potential suitors for the package, including Mick Davis’ X2 Resources.  BHP inherited its nickel mining operations through the take-over of Western Mining in 2005.

Simultaneously, Norilsk Nickel the world’s largest nickel producer, has announced that through its Australian subsidiaries, MPI Nickel and Black Swan Nickel  it has agreed to sell its Black Swan/Silver Swan assets, also located in Western Australia and currently under care and maintenance, to Poseidon Nickel. Norilsk had been reported as planning to sell all of its Australian assets back in May.

Norilsk says it expects to realise a material gain on the transaction, primarily through the release of environmental obligations which will be fully assumed by Poseidon. 

The Norilsk properties  comprise the Black Swan open pit mine, the Silver Swan underground mine, a processing plant and associated infrastructure. These were put on care and maintenance in February 2009.

"Adding to our previous disposals in Australia, the sale of Black Swan/Silver Swan marks another step forward in the implementation of our strategy focusing on Tier-1 mining assets. In addition to cash proceeds, we will realise significant value from the transfer of associated environmental obligations to the new buyer", Pavel Fedorov, Norilsk Nickel First Deputy CEO commented.

Weak nickel prices over the past few years, and the desire to concentrate on their major performing assets, have presumably been a major contributor to the two companies’ decisions to sell these nickel resources – ironically with their probable coming to fruition coinciding with something of a nickel price upturn.  Nickel is currently trading at around US$ 19,400/tonne on the LME, well short of the around $52,000/tonne achieved at its peak in 2007, before crashing down to below $10,000/tonne  over the following two years amidst the general price carnage in stocks and commodities.  While nickel prices are very much dependent on Chinese demand these days, and the economics of Chinese nickel pig iron production, recent Chinese data suggesting reasonable growth will have been helping the price of late.

While the big companies may well be looking at offloading these assets at fire sale prices, the predators will be looking to pick up bargains in the current financial environment.  But nickel tends to be a bit of a volatile market with something of a price cap nowadays due to the Chinese nickel pig iron production which tends to accelerate when prices get over $15-20,000/tonne, although the recent ban on ore exports by Indonesia may be changing nickel pig iron economics and raising the cost of production.

• [Editor:Yueleilei]