Canadians Go Christmas Shopping in Australia, Find a Bargain

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Researched by Industrial Info Resources (Sugar Land, Texas)--First Quantum Minerals Limited (TSX:FM) (FQM) (Vancouver, British Columbia) has purchased the (slightly used) Ravensthorpe Nickel Operation from BHP Billiton (NYSE:BHP) (BHPB) (Melbourne, Australia), at what appears to be a bargain price.

Click on image at right for a view of the Ravensthorpe Nickel Operation.

The operation was officially opened in May 2008, but was promptly closed in February 2009 at the cost of some 1,450 jobs. At the time, BHPB cited the global economic downturn and poor nickel prices as the reason for the closure, however some analysts believe it was more to do with the 'operational problems' experienced with the beneficiation of the low-grade ore.

Whatever the reason, the decision to close the operation and cut the jobs was sorely felt in the small local communities of Hopetoun and Ravensthorpe. The operation is located on Western Australia's south coast, near some of the world's most beautiful and pristine coastline. Many people had moved to the previously sleepy seaside town to literally set up shop to cater to the miners and their families, while enjoying a 'sea-change' in lifestyle. The announcement of the mine closure also affected these startup businesses as well. The local population simply did not possess the critical mass required to make these businesses viable, and BHPB received plenty of bad press for its decision to pull out of the area.

The decision by FQM to purchase and restart the operation will be welcomed by all. The mine and associated plant and infrastructure, including 160 suburban-style houses for the workforce, cost BHPB US$2.2 billion to build, but led to a massive US$3.6 billion in write-downs after less than a year of operation.

FQM reportedly purchased the operation--lock, stock, barrel and houses--from BHPB for US$376 million. In an interview with journalists, Martin Rowley, FMQ's executive director for business development, stated that FMQ believed the mine and plant required about 18 months and between US$120 million and US$150 million to resume operations. Rowley also stated that FQM was committed to restarting and continuing the project. "It won't shut down," he said, encouraging those who had been forced to leave the area after BHPB closed the operation to consider moving back. The rectification process is expected to require a workforce of about 200, while the workforce required to run the operation once it is fully functional is expected to be between 500 and 600 people.

In a separate interview, Philip Pascall, chairman and CEO of FQM, said, "The acquisition of Ravensthorpe nickel operation is a major step towards First Quantum achieving its goal of becoming a globally diversified mining company."

Mr. Pascall went on to say that FQM's strong balance sheet and realistic capital cost base for Ravensthorpe provided the company the time and the flexibility to address the commissioning and operational issues previously encountered, and to realise the full potential of the project. The Ravensthorpe community, and no doubt the FQM shareholders, hope he is right. The successful processing of low-grade laterite nickel ore has confounded more than just BHPB in the past. Nonetheless, at only US$376 million, if all else fails, FQM could probably make its money back on the scrap value of the steel in the plant alone.

The sale is subject to approvals from Australia's Foreign Investment Review Board and the Western Australian Mines Minister. Subject to these approvals, the miners expect the acquisition to be finalised during the first quarter of 2010.

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