Dynatec Gets Help with Madagascar Nickel Project

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Researched by Industrialinfo.com (Industrial Information Resources, Incorporated; Houston, Texas). Dynatec Corporation (TSX:DY) (Richmond Hill, Ontario) is banking on the Ambatovy Nickel project on the African island nation of Madagascar to transform it into a major metal producer. The Ambatovy Nickel project, a potentially large tonnage, long-life (approximately 27 years) nickel and cobalt metal producer, is located between Antananarivo, the capital of Madagascar, and Toamasina. The history of Ambatovy dates back to 1960 when it was discovered, and since then it has been the subject of several studies and ownership changes. It was periodically owned by some of the giant mining houses, such as Anglo-American in the early 1970’s, and Phelps Dodge in 1995, which later sold its rights to Dynatec.

Since the completion of the feasibility study by SNC-Lavalin, Dynatec has been looking for a partner to help develop this project. Initial plans, as outlined in the feasibility study, called for an open pit mining operation and slurry processing plant at the mine site, a 195 kilometer slurry pipeline from the processing unit to the pressure acid leach facilities, and a refinery in the port city of Toamasina. Port facilities and a 70 megawatt power plant are also needed. The Ambatovy Nickel project is capable of producing 60,000 tons of nickel and 5,600 tons of cobalt annually at the cost of $2.25 billion.

The lucrative nature and potential of Ambatovy, coupled with nickel prices, which have remained high as supplies of the metal continues to tighten worldwide, have attracted some of the major names to partner with Dynatec in the development of Ambatovy. South Africa's Impala Platinum Holdings Limited (Implats) holds 37.5% and Dynatec Corporation holds 37.5%. Theses two companies have brought in a third partner, Sumitomo Metal Mining, which now owns 25% of the project.

Now, backed by stronger and more experienced partners, Ambatovy Nickel’s development plans call for setting up a mining operation in Madagascar and building a facility to process nickel ore into an intermediate material. However, the refining of the material into nickel and cobalt would now take place at Impala's smelting site in South Africa, which will reduce the capital investment of the project by approximately $300 million.

Madagascar is located approximately 500 kilometers east of the African continent. A former French colony, Madagascar has a population of approximately seventeen million. Recently, government identified large-scale resource projects as an important element of the country's economic development strategy. The government updated the mining codes in 1999 and, in 2003, updated key areas of the company codes to attract large-scale mining investment dollars, and to back the responsible development of natural resource projects, such as Mandena mineral sands project, the Kumba’s Resource toliara minerals sands, and the Ambatovy Nickel project. The revitalization of the mining industry has enormous economic impact to the country’s economy, whose mainstay is agriculture, fishing and forestry, accounting for more than one-fourth of the GDP and employing 80% of the population. Madagascar is also endowed with deposits of graphite, chromite, coal, bauxite, salt, quartz, tar sands, semiprecious stones, and mica.

Headquartered in Richmond Hill, Ontario, Canada, Dynatec is a world leader in the hydrometallurgical treatment and processing of base and precious metals. It owns the Sudbury Joint Venture, which produces nickel, copper and precious metals, and a coal-bed methane project in West Virginia. Dynatec employs more than 1,300 people in offices in Canada, the U.S., and Madagascar.

Implats is the world's second largest primary producer of platinum. It has more than 30 years experience of producing nickel a by-product of platinum production. Implats employs about 31,600 people across its operations, and in the 2004 financial year, produced approximately 1.96 million ounces of platinum.

Sumitomo Metal Mining (SMM), a subsidiary of Japan’s Sumitomo Group, has been refining copper, gold, and nickel since 1961.

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