Royal Nickel Corp., the developer of the Dumont nickel mine in Quebec, aims to arrange funding for the $1.2 billion project before it receives permits next year, the company’s chief executive officer said.
The mine may produce 73 million pounds of nickel a year once Dumont starts output in 2016, before expanding to an annual average of 113 million pounds after five years, according to the results of a feasibility study released today by the Toronto-based company. Cash costs over the life of the mine are forecast at $4.31 a pound, Royal Nickel said.
CEO Tyler Mitchelson is betting that a shortage of new nickel mines beyond 2016 will reverse a supply glut, resulting in higher prices for the metal used to make stainless steel.
“We’re very bullish on the market at that point in time,” Mitchelson said in an interview. “There just isn’t that supply pipeline anymore.”
Nickel for delivery in three months fell to a four-year low last week on the London Metal Exchange after stockpiles rose to the highest since at least 1979.
The company, with a market value of C$42.4 million ($41.7 million), expects to get about $600 million through project debt financing including from export-credit agencies, Mitchelson said. Options for the balance of the project’s cost include subordinated mezzanine financing, offtake loans and sales agreements, as well as selling a minority stake in the project, he said.
The company is working with Rothschild to advise it on project financing, Mitchelson said.
Royal Nickel said in March it signed a memorandum of understanding with Tsingshan Holding Group Co., a Chinese stainless-steel producer, that they would consider offtake and partnership agreements once the Dumont feasibility study was completed. Tsingshan also expected to build a plant that would use nickel sulphide concentrate, which will be produced at Dumont, to produce stainless steel, Royal Nickel said at the time.