Gladstone Nickel Project shows an NPV of US$1,168 billion at long term
TORONTO, Oct. 3 /CNW/ - The Chief Executive Officer of the Company, Mr
John Downie, announced today the updated financial results of the Feasibility
Study for Stage 1 of the Gladstone Nickel Project ("the Project") ("IDFS")
using long term assumptions, revising the results announced on 20th June 2008.
"Given the current state of both capital and commodity markets it is
important that investors understand the strong economics of the Project using
long term assumptions. It is the Directors' belief that the current share
price of the Company does not highlight the underlying value of the Project.
Capital markets and commodity prices are generally under pressure but our
Project continues to show its economic viability at both current and long term
Gross Revenue in the first year of full production, assuming a two year
ramp up, is expected to be US$1,332 million per year, US$711 million lower
than previously announced whilst EBITDA is US$712 million, down US$307
million. Projected profit after tax and interest in the first year of full
production has been revised from US$538 million to US$297 million in real
terms at a gearing ratio of 70% debt for a 15 year loan period and an interest
rate of 8.5%.
Cash operating cost for the Project has been revised from US$2.38 to
US$2.13 per pound of nickel due to a lower nickel price, exchange rate
movements and sulphur price assumptions offset by a reduction in cobalt
credits due to a lower cobalt price. The Project net present value ('NPV') is
US$1,168 million ((*)see note below) using an 8% discount rate and commodity
prices and exchange rates as at 30 May 2008. This compares to an NPV of
US$2,331 million reported in June.
The capital cost, also reported in the 20th June 2008 market release has
been revised to US$3,518 million from US$3,840 million. The Directors believe
that the Company's association with China Metallurgical Construction (Group)
Corporation ("MCC"), based on MCC's prior experience, will reduce the capital
The Project shows a nominal IRR on equity of 17.8% and a nominal NPV of
US$979 assuming a 12% discount rate and a gearing ratio of 70% debt for a 15
year loan period and an interest rate of 8.5%.
These changes are not expected to affect planned production and the plant
can expect to produce, in its first year of full production, up to 64,753
tonnes of nickel and 6,164 tonnes of cobalt in 2014 following a 3 year
construction program and 2 year ramp up of operations.
(Note: Refer background table of financial outputs, KPI's and major input
This news release includes certain statements that may be deemed
"forward-looking statements". All statements in this news release, other than
statements of historical facts, that address future exploration drilling,
exploration activities and events or developments that the Company expects,
are forward looking statements. Although the Company believes the expectations
expressed in such forward-looking statements are based on reasonable
assumptions, such statements are not guarantees of future performance and
actual results or developments may differ materially from those in
forward-looking statements. Factors that could cause actual results to differ
materially from those in forward-looking statements include metal prices,
exploration success, continued availability of capital and financing, and
general economic, market or business conditions.
Outputs from Financial Model Unit Current
Real NPV @ 8% Discount Rate, 100% equity after Tax US$M 1,168
Real IRR % 11.2%
KPI's in First Year of Full Production
Nickel Production tonne 64,753
Cobalt Production tonne 6,164
C1 cash cost after credits US$/lb 2.13
Free Cash Flow US$M 551
EBITDA US$M 712
Major Input Variables
Nickel Price US$/lb 7.60
Cobalt Price US$/lb 15.00
Construction AUD:USD average AUD:USD 0.8275
Operations AUD:USD average AUD:USD 0.7500
Sulphur Price (FOB Vancouver) US$/tonne 50
Capital Cost at relevant exchange rates US$M 3,518
N.B. All prices and assumptions are quoted in real 2008 terms unless
otherwise stated. The long term price forecasts are directors' estimates.
The consumption rates of reagents and consumables have been estimated by
Aker Kvaerner Australia Pty Ltd as part of their role in completing the IDFS.
Prices for key reagents have been based on long term pricing assumptions. In
addition, shipping costs have been calculated based on 10 year long term
shipping contract rates provided by industry experts.
A comprehensive labour list has been developed for the proposed
operations with an estimated 530 employees required at the Gladstone plant.
Labour rates have been based on industry surveys in the Gladstone region.
Maintenance material costs for the refinery were estimated at US$40
million per year based on percentages of direct capital costs of plant,
equipment and infrastructure. Additional mine maintenance estimates were
provided by mining consultants IMC Consultants Pty Ltd and SRK Consulting Pty
Ltd for both Marlborough and New Caledonia respectively.
Average expected feed grades from the mines are expected to produce
nickel metal of 63,952 tonnes per annum and cobalt of 6,114 tonnes production
per annum for the first 10 years of full production in Stage 1.
For further information:
For further information: Enquiries to: John Downie, Chief Executive
Officer - Gladstone Pacific Nickel, Tel: +61 (0) 7 3231 7100; Fiona Owen -
Grant Thornton UK LLP, Tel: +44 207 383 5100; Simon Rothschild - Bankside
Consultants, Tel: +44 207 367 8888; John Prior - Arbuthnot Securities, Tel:
+44 207 012 2000