ARM aims to tough it out

• Nickel miner’s products have large potential market in electric vehicles, but legal battle and smelting headaches take off the shine

Nkomati Nickel could be an important asset for African Rainbow Minerals, but it has to weather low nickel prices, find an alternative to the long and complicated process of treating its ore and wait for the legal tussle between its partner Norilsk Nickel and the Botswana government to run its course.

Nkomati Nickel could be an important asset for African Rainbow Minerals (ARM), but it has to weather low nickel prices, find an alternative to the long and complicated process of treating its ore and wait for the legal tussle between its partner Norilsk Nickel and the Botswana government to run its course.

ARM, a diversified miner in which billionaire chairman Patrice Motsepe is heavily invested, said in its 2017 fullyear results last week that it was worried about the prospects for nickel prices over the next few years and was in discussion with Russia’s Norilsk, its equal partner at the mine, and “various options are being considered”.

OPTIONS

These options remain unclear, but ARM CEO Mike Schroder said Nkomati was a potentially important asset for the company, particularly as demand for minerals used in batteries for electric vehicles, including nickel sulfide, increased as uptake of the vehicles boosted manufacturing of the energy cells.

“Provided we can stay in there long enough … nickel sulfide will be sought after in the world. Nkomati lends itself to that,” said Schmidt, referring to the type of nickel the mine produces. “If the price is right, we have a huge underground resource at Nkomati which could be brought to book. We have the underground infrastructure, but it’s been mothballed because the price doesn’t make sense now,” he said.

“We sit with Nkomati, which is a marginal producer, but the outlook for demand looks promising based on electric vehicles, so we need to consider all our options to preserve, protect and enhance value.”

Norilsk, which has made it clear it no longer wants African nickel assets, had agreed to sell its 50% Nkomati stake to Botswana’s state-owned BCL, which has run into severe financial difficulties and has not consummated the deal.

Norilsk has taken the Botswana government to court.

FINNISH SMELTER

The exit of Norilsk has prompted the ARM board to reconsider its strategy around sending its nickel ore to Norilsk’s Harjavalta smelter in Finland.

It is a long and costly process that gives rise to variable revenue streams as the four-month pipeline takes account of fluctuating metal prices.

One of the options is to investigate the potential of using the Machadodorp smelting complex, which is now treating slag dumps to make ferrochrome for the next six months and then ferromanganese, also from slag dumps, for the following eight months.

While the furnaces cannot treat nickel, the plant does have licences, permits, infrastructure and emission licences — which must make it a contender for ARM’s strategy to find ways to bring nickel processing closer to home.

“There’s a huge resource at Nkomati. There is a future potential demand for nickel.

“Can we find more efficient ways of enhancing the metal content, the payability? We owe it to ourselves to look at that,” Schmidt said.