[2007-06-19]  Nickel sale deal finalized
A hedging programme has been finalised for the forward sale of 9,020 tonnes of nickel over the period between June 2009 and December 2013.

According to a press release by Chief Financial Officer, Nicholas Day or Managing Director, Dale Rogers the amount hedged represents less than 15% of the payable nickel from production at the Munali Nickel Project.

" The European Investment Bank and Barclays Capital have provided a senior debt financing facility of up to US$60 million for the Munali project.

As part of the requirements associated with this facility, Albidon has completed a nickel hedging programme over the debt service period between June 2009 and December 2013," he said.

He said the average realised nickel price, net to the Company, for the hedged production is US$23,606 per tonne (US$10.71/lb) adding that the average hedge prices achieved are substantially higher than market consensus forecast nickel prices over the hedge period.

Mr. Rogers said this modest amount of hedging locks in strong operating margins while providing 85% exposure to cash nickel prices while the other payable metals, copper, cobalt, platinum and palladium are unhedged.

The Company has forward hedged 9,020 tonnes (164 tonnes per month), which represents less than 15% of the Munali project's expected payable nickel production and no more than 26% of payable nickel from production in any one year.

The hedging commences in June 2009, which allows for full production ramp up from mid 2008 and provides exposure to the spot price of nickel for the first 12 months of production.

The hedge prices commence at approximately US$30,831 per tonne in mid 2009, stepping down in line with the forward curve to average US$19,146 per tonne in 2013, for an average hedge price of US$23,606 per tonne.

He said the prices are substantially higher than those assumed in the Munali Bankable Feasibility Study and the market consensus nickel price forecasts for the hedge period.

"It is also noted that research by Barclays Capital indicates that only 5% of cash nickel prices observed since 1990 have been higher than USD$20,750 tonne and only 10% have been above US$15,022 tonne," he said.

He added that the Company has completed the hedging agreements on very favourable terms.

This level of hedging is modest and ensures the project is robust by locking in strong operating margins, while at the same time providing a high degree of exposure to upside in cash nickel prices.
Ends.




© 2005
Source: © 2005 Zambia Daily Mail.