Gladstone Pacific Nickel Ltd ("Gladstone" or "the Company") ACN (104 261 887) - Feasibility Study Results



    Gladstone nickel project feasibility study shows US$625 million profit
    after tax & interest in first year of full production

    GLADSTONE, QUEENSLAND, Jan. 18 /CNW/ - The Managing Director of the
Company, Mr John Downie, announced today the final financial results of the
Feasibility Study for Stage 1 of the Gladstone Nickel Project ("the Project")
("IDFS").
    The study demonstrated, in the first year of full production assuming a
two year ramp up that the Project is expected to generate gross revenues of
US $2,417 million and Earnings Before Interest, Tax, Depreciation and
Amortisation ("EBITDA") of US$1,373 million at real 1st January 2008 terms
using current prices and exchange rates. Profit after tax and interest from
the Project, in the first year of full production, is projected to be US$625 
million in real terms at a gearing ratio of 70% debt for a 10 year loan period
with an interest rate of 8.5% per annum.
    "The study analysis confirmed the Project net present value ('NPV') at
US $4,322 million(1) using an 8% discount rate and current prices and exchange
rates. The Directors believe this is one of the most advanced projects in the
nickel pipeline. It is situated in a low sovereign risk environment, and it
has strong economics as well as potential for significant expansion." Mr.
Downie said.
    The previously reported cash unit operating cost as announced on 25th
October 2007 has been revised from US$2.19 to US$2.71 per pound of nickel, net
of by-product credits, due to overseas ore being indexed to the nickel price
and due to a change in exchange rates. The capital cost, also reported in the
25th October 2007 market release has also been revised from US$3,400 million
to $3,656 million as a result of a change in the exchange rates.
    The Company plans to build one of the world's largest nickel and cobalt
production facilities at its site in Queensland, Australia, treating 100%
owned ore inventory from Australia together with ore from its Joint Venture in
the South West Pacific. Stage 1 of the Project comprises a two autoclave plant
including atmospheric leach at Gladstone, producing refined nickel and cobalt
metal. The plant will process Marlborough ores blended with substantial
tonnages of ore imported from Gladstone's joint venture in New Caledonia. The
plant can expect to produce up to 64,753 tonnes of nickel and 6,164 tonnes of
cobalt in the first year of full production.

    
    -------------------
    (1) Refer background table of financial outputs, KPI's and major input
        variables
    

    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

    Background

    Stage 2 of the Project involves expansion to four autoclaves whereupon
the Gladstone Nickel Project (GNP) will produce approximately 120,000 annual
tonnes of nickel and 12,000 annual tonnes of cobalt. The total Project, once
completed, would place Gladstone as one of the world's most significant nickel
and cobalt producers.
    The IDFS for Stage 1 of the Project is based on the Gladstone plant being
supplied with a blend of Marlborough ore (~30%) and east coast New Caledonian
ore (~70 %). Marlborough is a key element of the Project, providing secure
local ore supply and risk mitigation for any foreign ore supply disruptions.
Detailed mine plans and costs have been completed at the Marlborough deposits.
The majority of the overseas ore required for the plant is to be obtained from
a Joint Venture between Société Minière Georges Montagnat and the Company
under an arm's length laterite ore purchase arrangement (as announced on the
20th August 2007). Drilling is now underway to generate a JORC compliant mine
ore reserve for the JV deposits. Overseas ore costs also include the direct
purchase of 800,000 tonnes of ore per annum from Société des Mines de la
Tontouta, a company that owns nickel mines and numerous nickel tenements on
the east coast of New Caledonia.

    
    -------------------------------------------------------------------------
    Outputs from Financial Model                 Unit                Current
    -------------------------------------------------------------------------
    Real NPV @ 8% Discount Rate,
     100% equity after Tax                       US$M                  4,322
    -------------------------------------------------------------------------
    IRR                                             %                   17.6%
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    KPI's in First Year of Full Production
    -------------------------------------------------------------------------
    Nickel Production                           tonne                 64,753
    -------------------------------------------------------------------------
    Cobalt Production                           tonne                  6,164
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    C1 cash cost after credits                 US$/lb                   2.71
    -------------------------------------------------------------------------
    Free Cash Flow                               US$M                    989
    -------------------------------------------------------------------------
    EBITDA                                       US$M                  1,373
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Major Input Variables
     (Real basis Jan 2008)
    -------------------------------------------------------------------------
    Nickel Price                               US$/lb                  12.89
    -------------------------------------------------------------------------
    Cobalt Price                               US$/lb                  44.00
    -------------------------------------------------------------------------
    AUD:USD                                   AUD:USD                 0.8852
    -------------------------------------------------------------------------
    Sulphur Price (FOB Vancouver)           US$/tonne                    420
    -------------------------------------------------------------------------
    Capital Cost at relevant exchange rate       US$M                  3,656
    -------------------------------------------------------------------------
    NB: All numbers in the above table are quoted in 1 January 2008 terms.
    

    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 current prices in January 2008. 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.

    The Company has utilised a wide range of specialists and consultants in
preparing the IDFS. Some of these consultants are:

    
    Marlborough - Deposits
        -  Geology and Mining         IMC Consultants Pty Ltd (IMC) &
                                      Golder Associates Pty Ltd
    New Caledonia - Deposits
        -  Geology and Mining         SRK Consulting Pty Ltd
        -  Stockpile / Wharf          Kellogg, Brown and Root Pty Ltd &
            facilities                McConnell Dowell (NZ) Constructors Pty
                                      Ltd

    Gladstone - Production Facilities
        -  Refinery
           -  Leach & Metals plant    Aker Kvaerner Australia Pty Ltd
           -  Residue & Return        Alcan Engineering Pty Ltd &
               Decant Liquor          Diversified Construction Pty Ltd
                Pipelines

        -  Wharf, Conveyors &         Connell Hatch through
            Seawater systems          Central Queensland Ports Authority
                                      (CQPA)

        -  Residue Storage Facility   Golding Contractors & URS Australia Pty
                                      Ltd
    Other Activities
        -  Native Title                  Minter Ellison
        -  Environmental Studies         URS Australia Pty Ltd
        -  Financial modeling            KPMG
        -  Independent Review            Behre Dolbear Australia Pty Ltd

    





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 Corporate Finance, Tel: +44 207 383 5100; Simon Rothschild
-Bankside Consultants, Tel: +44 207 367 8888, Web:
www.gladstonepacific.com.au, Email: info@gladstonepacific.com.au

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Gladstone Pacific Nickel Ltd.

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