Norilsky Nickel, Russia’s largest diversified mining company took the international markets by surprise this week when they announced the suspension of the multi-million pula Activox project at its Tati Nickel mine due to escalating costs, partly blamed on the power outages within the region.
In a statement released on Wednesday, the company said that following an extensive forensic audit that involved third parties, it was realized that the project would need more than US $ 498 million (P 3.3 billion) that was originally budgeted for.
“Following the acquisition of LionOre Mining International by Norilsky Nickel, an extensive review of the Activox refinery Project was initiated by Norilsky Nickel. This included internal and independent third party review which highlighted that a substantial project cost escalation from September 2006 bankable feasibility study estimated at US $ 498 million,” the company said.
“The major contributing factors to the substantial cost were an increase in construction, equipment and project management costs worldwide. In addition to energy constraints, as a result of tight balance currently being experienced in Southern Africa, we assessed as a risk that would adversely affect commissioning, time to production and overall economics of Activox refinery project,” it added.
Activox is a patented hydrometallurgy process that recovers nickel and copper metals from sulphide concentrate. It combines the smelting and refining, after a dense media separation process, and has a high recovery rate that allows low grade ore to be profitably mined.
Under the plan, Activox, which is one of its kind in the world, was expected to increase production from 14.500 tonnes per annum to 22,000 and, at the same time, extend the life-span of the mine by a further nine years to 2019.
“The aim of this project at Tati Nickel was to improve overall recoveries of the nickel from concentrate that are currently being treated by traditional pyrometallurgical means. The incremental recovery gained in this application at brownfield site does not economically justify the capital expenditure increase and, therefore, the shareholders have agreed to postpone the project indefinitely,” the company stated.
The technology was a focal point of a protected bid war for LionOre by Norilsky and the Switzerland-based Xstrata. When it was introduced in 2007, Activox was touted as a major innovation in the extraction of metals. Botswana was proud to be the birth place of such a major milestone in the metal refinery industry and, at peak, it would employ close to 3000 peopleÔÇömost of them being localsÔÇöand contribute about three percent of the gross domestic products.
Activox was expected to be replicated to other parts of the world where Nolrisky has some interests. First, it was scheduled to be duplicated in South Africa before moving on to Australia.
But on Wednesday, about 1,700 Norilsk employees were idling around in stunned disbelief after management told them that they were due to lose their jobs because a decision had been taken to shelve the project.
When The Sunday Standard team arrived at the BMR plant, there was very little activity going on and most contractors had packed their machinery, ready to ship out. A few employees were loitering around the locked gates of the construction site, under the watchful eye of a bunch of policemen and SSG personnel, who had reportedly been called in after some employees became hostile on hearing that they would lose their jobs.
“Job losses are inevitable in a scenario like this,” said Divisional Manager Organization and Capability, Peter Meswele. He, however, added that the mine had urged all contractors to finish off all the phases of construction that they were involved in “to ensure continuity if we revive in future”.
The Botswana Mine Workers Union, Tati Nickel Branch Chairman, Kabelo Maano, yesterday launched a scathing attack on the Norilsk management and the government of Botswana.
“There is no way that such a decision would be taken without the approval of government,” he said, adding that they are still perturbed that management took such a drastic decision without first consulting the union. He said that the task at hand is to ensure that the close to 1200 employees who were working for the various construction companies at the plant are paid all their dues.
Meanwhile, Meswele has indicated that the close to 200 people who are directly employed by BMR will not lose their jobs as Norilsk has decided to continue operating the demo plant.
While Maano insists that the union was not consulted, Meswele maintains that the decision was taken after consultations with all the other stakeholders.
Analysts have commented that the loss of the Activox project has a stink that is similar to that of the Hyundai saga a few years ago and suspicions abound that there are plans to relocate the project elsewhere. Some have expressed shock that government would let such a lucrative project slip out of her hands, especially since it would also translate to lots of employment for Batswana.
Meanwhile, Norilsk management was not forthcoming with information as to what would happen to the land that was degraded and the uncompleted construction that lies at the plant.
By the time of going to press, the ministry of Minerals, Energy and Water Resources had not responded to The Sunday Standard questionnaire.