Plinian Capital, founded by former Lonmin Plc Chief Executive Officer Brad Mills, plans to raise $40 million from private equity funds to restart a Zambian nickel mine where operations ceased in 2012.
The company is in talks with investors, Anton Mauve, a partner at London-based Plinian, said in reply to e-mailed questions on Wednesday. He declined to name them.
Plinian is hoping to re-open the Munali nickel mine, about 60 kilometers (37 miles) south of Lusaka, the capital. Previous owners have halted operations twice since it opened in 2008 as they struggled with its geology and falling nickel prices. Work was most recently suspended in 2012.
“Munali nickel mine is a good example of the kind of distressed asset that we invest in,” Mauve said. “We have a clear understanding of why the operations failed previously,” and studies have identified potential significant operational improvements, he said.
Nickel for delivery in three months has fallen by 33 percent in the past year to $13,115 a metric ton on Wednesday in London.
Plinian owns 20 percent of Consolidated Nickel Mines, which has agreed to rent Munali from Jinchuan Group Co. Jinchuan acquired Munali through the 2013 purchase of Albidon Ltd.
Plinian has the right to increase its stake in Consolidated Nickel to 70 percent, said Mauve. Plinian has formed a partnership with CE Mining, a unit of London-based Generation Asset Management, to raise the $40 million needed to restart operations at Munali.
Under the plans, Munali will produce 4,750 tons of nickel in concentrate yearly and this may increase to about 8,000 tons, said Mauve. Plinian intends to complete the funding by the end of September and to open the mine by the end of the year, he said.
“Through regional aggregation we could double or quadruple this over a five- to 10-year period,” he said.
This objective may be imperiled by a change to Zambia’s mining tax system, under which royalties increased to 8 percent for underground operations and 20 percent for open-pit ones since the start of the year. The government plans to change this to a uniform 9 percent royalty in combination with a 30 percent profit tax starting July 1 after mining companies said the system would lead to 18,000 job losses this year and the closing of some operations.
“The proposed taxation policy would be unfavorable for the restart of Munali,” Mauve said of the planned changes the government will present to parliament for approval in June.
Mills, 60, in 2009 founded Plinian, which has $570 million under management, a year after quitting his job as CEO of Lonmin amid a hostile takeover attempt by Xstrata Plc that it subsequently abandoned. Mills ran Lonmin from 2004 until September 2008, when he left the company. He presided over a series of problems including safety stoppages because of accidents, labor strikes, unplanned plant and equipment shutdowns and power outages in South Africa.