Billion dollar nickel mine in Burma to go ahead

The long delayed go-ahead for the laterite nickel mining project at Tagaungtaung in northern Burma has finally been given, and construction is expected to begin later this year after the monsoon season ends. But costs have risen dramatically and are likely to reach the billion dollar level before the mine begins production in 2011.

A brief news report in the New Light of Myanmar (30/07/08) said a joint-venture agreement to proceed with the mine had been signed by Wang Xiaowei, chairman of the China Non-ferrous Nickel Mining Co and Win Htein. Managing- Director of No. 3 Mining Enterprise of the Burmese government's Ministry of Mines the previous day. On the same occasion, the Chinese company was given the green light to go ahead with its part in the project by the Myanmar Investment Commission. There have been several major changes in plans for the mine since news last circulated about the project a year ago. The Myanmar state company has taken up a 50% stake in the joint venture instead of the 25% that had been mooted in previous news stories. Very striking is the new price tag assigned to the project. A company official told the China Interfax news agency (Interfax, 01/08/08) acccessible at: http://www.minesandcommunities.org/article.php?a=8738

that the total cost of getting the mine into production is now estimated at US$ 800 million, up by 60% over projections made four years ago when China Non-ferrous first scouted the Tagaungtaung project. There can be little doubt that these costs will rise to a billion and beyond over the three years before the mine becomes productive. It is China Non-ferrous that will have to pay for the capital costs of getting the mine operational. "CNMC is responsible for all investment in the project, while the No.3 Mining Enterprise will contribute its mining rights to the Tagaung Taung nickel mine," Wang [CNMMG spokesperson] told China Interfax. It would seem that these funds will be raised in part through international capital markets. China Non-ferrous Nickel Mining Co -- a new name on the Asian mining scene - appears to be a subsidiary of China Non-ferrous Metal Industry Foreign Engineering and Construction Co Ltd which undertakes the foreign mining and equipment projects of the parent China Non-ferrous Metal Mining Group, a state-owned enterprise of the PRC.

A brief introduction to the CNMMG can be found at:

http://fec2.mofcom.gov.cn/aarticle/listofchina/200611/20061103751333.html

Information about the financial activities of the engineering and construction susbsidiary of CNMMG can be found on Google Finance.

Chibber's 'Mineral Resources of Burma' (1934), Bender's 'Geology of Burma' (1983) and the Geology and Mineral Resources Atlas of Myanmar published by ESCAP in the late nineties all have useful information and maps about the geology of the Tagaungtaung area. Unfortunately, the most recent background information on the Tagaugtaung chromide nickel ore deposit is not currently available on the website of the Myanmar Mines Ministry. Briefly, the Tagaung Hills are located about 200 km north of Mandalay along the east bank of the Irrawaddy. Prospecting and some small scale mining activity has been carried out in the area off-and-on since the late 1950s. Between 1995 and 2000, a small mining group known as the STAG Co produced about 13,000 tons of chromite in the area and since then ME No 3 has been taking out some 500 tons a year to produce ferro-chrome at the Ministry's pig iron plant near Pyin-U-Lwin. Judging by the price tag for the project, an on-site smelter is envisaged for the mine. Whether further refining would take place there or in China, where demand for nickel has gone up exponentially in recent years, is not known. Shipping of the nickel produced at Tagaungtaung is another unknown. Possibly by barge downriver to Yangon, thence by sea to China. More likely, overland to Ruili on the China-Burma border which is supposed to be destination of a railway presently under construction from Xiaguan in western Yunnan.

Electric power needs of up to 100 MW during construction and for the operational phase of the mine could be taken care of by the soon-to-be-opened 600-MW Shweli No 1 plant near Namkham or the 780-MW plant at Yeywa near Mandalay which is due to go on-line in 2009-10. Transmission facilities for the Shweli project are currently nearing completion. Currently a 132-kV line extends north from Mandalay to a substation at Ngatpyawone close to Tagaungtaung area. A recent, brief and excellent survey of the nickel industry in China, apparently for a conference in Lisbon in April, 2008, is available at:

http://www.insg.org/presents/Ms_Wang_Apr08.pdf

Even a billion dollars must not seem too high a price to pay for satisfying the demands that Ms Wang mentions. A year ago, CNMMG was calling for production of 22,000 tons of nickel and 85,000 tons of ferronickel per annum from the Tagaungtaung mine. Given today's reduced spot price of $ 8.00 a pound, it shouldn't take too long to pay off a billion! But then there's always that 50% haircut for the folks at Nay Pyi Taw to be taken into consideration. ES, Canada, 13 August 2008