Oracle Deal Augurs Well for Nickel Mines

Nickel Mines Ltd has finalised plans to buy a 70% stake in the Oracle Nickel project in Indonesia in a US$525 million deal that will see a substantial rise in the amount of nickel it produces.

The deal was announced in October 2020 and has slowly progressed towards finalisation this week.

Nickel Mines told the ASX on Wednesday that it had executed a binding Definitive Agreement with its partner Shanghai Decent Investment (Group) Co., to acquire a 70% equity interest in the Oracle Nickel Project.

That consists of four rotary kiln electric furnace lines that has commenced construction within the Indonesia Morowali industrial Park in Central Sulawesi, Indonesia.

“Further to the Company’s ASX release on 22 November 2021 announcing a Memorandum of Understanding with Shanghai Decent for the Company to participate in Oracle Nickel, the signing of this Agreement formalises the Company’s investment opportunity,” Nickel Mines said.

Nickel Mines aid it will acquire its 70% interest in Oracle Nickel for a total consideration of $US371 million (which is 70% of the $US530 million cost), together with the obligation to provide Oracle Nickel $US154 million (which is 70% of US$220 million) of “construction” funding by way of shareholder loans.

“Actual construction costs for the Oracle Nickel Project together with the power plant shall not exceed US$750M with Shanghai Decent undertaking to indemnify Nickel Mines for any construction costs exceeding US$750M, Nickel Mines said in the ASX statement.

Nickel Mines said the deal will more than triple the size of its attributable nickel production and operational cash flows over the next 15 months.

“With 12 RKEF lines in operation by Q1 2023 and approximately 100,000 of attributable nickel production, Nickel Mines will sit comfortably amongst the top-10 global producers and be arguably the largest listed pure-play nickel exposure globally.”

In November Nickel Mines said that first production of nickel pig iron (NPI) from the project is now expected in the first quarter of next year — well ahead of the October 2022 contractual delivery date.

Under a revised commissioning timetable, the company expects to see the first of four rotary kiln electric furnace lines commissioned in March, with the other three lines to be commissioned progressively over the following 90 days.

The company aims to have all four lines producing by next June.


About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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