Mirabela Nickel Ltd. - 40% capacity increase confirmed for 27,000tpa of nickel



    TSX: MNB, ASX: MBN
    Ordinary shares outstanding: 129,781,100

    PERTH, Australia, July 30 /CNW/ - Mirabela Nickel Limited (TSX: MNB, ASX:
MBN) is pleased to announce that the Santa Rita project is now being
engineered and constructed for a 6.4 mtpa throughput capacity, up 40% from
4.6 mtpa. This reflects an average annual production rate of 27,000tpa of
nickel in concentrate assuming a resource grade of 0.61% Ni and a recovery
rate of 70%. The Company plans to complete ramp up to the full 6.4mtpa
throughput rate by mid 2010.
    The increase in throughput rate optimizes the project's value in light of
the increasing resource size at a relatively low incremental cost. The
estimated sunk capital cost of the revised 6.4 mtpa project is US$387m and
includes plant, infrastructure, land acquisition, port upgrade, first fills,
spares and contingency. The new capital cost estimate represents a 20%
increase over the previous estimate of US$322m for the 4.6mtpa project.
    The cost increase is mostly attributable to additional equipment required
for the upgrade and Brazilian Real exposure on the additional expenditure.
Other than these items, the previous capital cost estimate has not
significantly changed, assisted by hedging of the Brazilian Real and fixing
prices for structural steel, concrete, diesel and other items.
    "A production rate of 27,000tpa of nickel positions Mirabela to become
one of the largest independent nickel producers in the world and we are
currently studying the possibility of additional capacity from an underground
operation," said Managing Director Nick Poll. "We are very pleased with the
construction progress with over 50% of the project now completed and capital
costs remain under control, due largely to prudent hedging of the Brazilian
Real and fixed price purchasing. The increase in production capacity, capital
cost and timing is in line with expectations and we are expecting an upgrade
to the resource estimate in August," he said.
    Construction of the project is now 50% complete and the project remains
on target for commencement of production in mid 2009. Civil engineering works
for the primary crusher and the ore stockpile area are on track to be
completed within weeks, enabling delivery of the primary crusher in September.
The mill foundations and other civil engineering works for the flotation plant
are also on schedule for delivery of the grinding circuit and flotation tanks
in December. Suppliers of long lead time items (crusher, grinding circuit,
flotation tanks and transformers) have confirmed that fabrication of these
items is also on schedule. About 2.3mt of pre-strip material has already been
removed from the open-pit, much of which is being used for construction of the
tailings dam. Critical to achieving the 6.4mtpa throughput rate will be
delivery of a second ball mill that remains on schedule for delivery in July
2009.

    Mining Fleet

    The only capital item not covered above is the initial mining fleet,
which will cost about US$20m and will be funded by a separate lease finance
package. The mining fleet capital costs are included in the mining operating
expense estimate of US$1.31 per tonne of material (at BRL$2.00), as previously
announced by the Company. Completion of the purchase and financing agreements
is expected by September.

    Other working capital requirements

    In addition to sunk capital, there are a number of other working capital
requirements that require financing on a pre-revenue basis:

    
                   Working capital requirements, Santa Rita
               ------------------------------------------------
                 US$
               ------------------------------------------------
                 43m   Refundable sales tax (refundable 2010)
                 28m   Finance costs
                 24m   Pre-strip
                 18m   Corporate, drilling and exploration
                 15m   Ordinary working capital
               ------------------------------------------------
                128m   Total
               ------------------------------------------------
    

    The $43m in respect of sales tax is due to domestic selling of
concentrate to Votorantim - the Company is not able to obtain a sales tax
exemption on capital purchases that would have been available if the
concentrate was being exported as originally planned. A full rebate on this
charge is received during the first year of production. This working capital
requirement has been financed by a US$50m subordinated loan as part of an
offtake agreement with Votorantim, signed in July.
    The financing charge of $28m comprises interest and fees incurred under
the various debt facilities prior to the project becoming cashflow positive.
    The pre-strip charge of $24m is included in the overall 7.7 to 1 strip
ratio for the project. However, this component of the mining costs needs to be
funded prior to the project becoming cashflow positive. In effect, the
pre-strip operates as a reduction in subsequent mining costs.
    The corporate, drilling and exploration charge of $18m represents about
$10m allocated to further resource and underground drilling at Santa Rita and
$2m for other exploration projects, including Palestina. Corporate overhead
includes a technical team that is overseeing project construction.
    The estimates of additional sunk capital and working capital above use
the current exchange rate of 1.6 Brazilian Real to the US dollar. The original
US$322m cost estimate was based on an exchange rate of 2.0 Brazilian Real to
the US dollar with the Real component covered by US$270m of currency hedging
at that exchange rate.

    Financing

    The total sunk capital and working capital requirement for Santa Rita of
US$515m (ex mining fleet) will be funded as follows:

    
                       Summary of Santa Rita financing
                      ---------------------------------
                         US$
                      ---------------------------------
                        165m  Equity (already raised)
                        280m  Senior debt
                        100m  Subordinated debt
                      ---------------------------------
                       $545m  Total
                      ---------------------------------
    

    This total funding position leaves a buffer of US$30m.
    The Company recently announced the underwriting of US$280m in senior debt
by Barclays and Credit Suisse, and an interim debt facility of US$80m provided
by Barclays and Credit Suisse repayable upon syndication of the senior debt.
The Company also recently announced a subordinated debt facility of US$50m to
be provided by Votorantim in conjunction with a 5 year off-take agreement for
50% of Santa Rita concentrate production. The Company is currently in advanced
negotiations to finalise a second off-take agreement and is expecting that to
include a further US$50m subordinated debt facility.

    

    (signed)                             (signed)

    Nick Poll                            Craig Burton
    Managing Director                    Corporate Director
    

    Background

    Mirabela Nickel Ltd is listed on the Australian and Toronto stock
exchanges. With an open-cut mining reserve of 84mt grading 0.61% Ni,
Santa Rita is the largest greenfields nickel sulphide discovery in the last
12 years and the third largest open-cut nickel sulphide mining reserve
worldwide.
    Construction of a nickel sulphide concentrator commenced in November 2007
and is progressing well. The plant is expected to produce 18,500 tpa of nickel
in a sulphide concentrate from one open-cut mine starting from mid 2009
increasing to 27,000 tpa by mid 2010. At this rate of production the project
will have a mine life of at least 14 years. A resource update is expected in
August.

    Caution Regarding Forward Looking Statements: The forward-looking
statements made in this announcement are based on assumptions and judgments of
management regarding future events and results. Such forward-looking
statements involve known and unknown risks, uncertainties, and other factors
which may cause the actual results, performance or achievements of the Company
to be materially different from any anticipated future results, performance or
achievements expressed or implied by such forward-looking statements. There
can be no assurance that the capital expenditures required to construct a mine
and related processing facilities at the Santa Rita Project will be as
expected or that the Company will successfully arrange all required project
finance facilities.





For further information:

For further information: Australia contact: Nick Poll, Managing
Director, Telephone: +61 8 9324 1177, nickp@mirabela.com.au; Australia contact
(media): Caroline de Mori, Purple Communications, Telephone: +61 8 9485 1254,
cdemori@purplecom.com.au; Toronto contact (media): Eric Tang, Porter Novelli,
Telephone: (416) 422-7200, eric.tang@porternovelli.com

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