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Caledonia Mining seals cobalt refinery deal with Chinese firm

Caledonia Mining seals cobalt refinery deal with Chinese firm
By Chiwoyu Sinyangwe
Friday February 01, 2008 [03:00]

CALEDONIA Mining has announced that it has signed a six-year off-take agreement with a large Chinese refiner for establishment of a cobalt refinery at the company’s Nama project. Nama Cobalt Project is a wholly owned subsidiary of Caledonia and it is located north west of Konkola Copper Mine and adjoins the extensive holdings of Teal Mining and Exploration Limited near Chililabombwe.

The announcement was made in a statement released in Lusaka by the Toronto based mining giant. The statement did not however disclose the name of Chinesecompany. IAt the Nama Project, Caledonia plans to commence mining using open pit mining methods, pre-concentration and conventional cobalt extractive technology.

The statement also announced that under the terms of agreement, Caledonia would supply a minimum of 21,000 tonnes of cobalt metal equivalent in the form of cobalt hydroxide from its Nama Cobalt Project over the next six years.

“The agreement specifies that the price shall be based on the published monthly average of 99.3 per cent cobalt from the London Metal Exchange, and contains a guaranteed "Take or Pay" minimum cobalt price of US $12 per pound of cobalt metal and that the agreement is renewable,” the statement read in part.

And commenting on the development, Caledonia Mining president and chief executive officer Stefan Hayden said the agreement marked an important milestone for Caledonia as the company commenced with the development of Nama project.

“In the context of current spot prices for cobalt of US $44 per pound and the floor price of US $12 per pound, this contract represents substantial value and confirms Caledonia's potential for Nama, which I expect will prove to be one of the world's largest primary cobalt deposits and also become one of the key primary players in the cobalt market,” said Hayden.

“Negotiations on further agreements with refiners continue. With rising demand from China, India and America, we believe the fundamentals for cobalt remains robust in the near-term."

Caledonia is proceeding with detailed mine planning and is targeting commencement of production by early 2009 at an expected annual production level of 10,000 tonnes of cobalt metal.

A recent internal feasibility study had estimated capital expenditure at US $125 million and production costs below US $10 per pound.

Labels: COBALT

posted by MrK @ 1:22 PM