The Nickel Business

1
The Nickel Business

• And
• Where does European Nickel fit in?

2
A Short Background Lesson

• Discovered in 1751 by Cronstedt
• Named kupfernickel Old Nicks Copper probably
  because it is so hard to refine
• Atomic weight 58.71
• Atomic number 28
• Melting point 1,453C
• Used in 300,000 product types of which stainless
  steel represents 65 of consumption, followed by
  plating (9) and chemicals (6)

3
Sources of Nickel

• Found in 20 countries
• Estimated reserves (based on 50 of resource)
  give at least 100 years of continuing production

4
Sources of Nickel

• Total nickel production 2004 estimated at
  1,200,000 MT
• Total consumption 1,260,000 from
• Primary from sulphide ore
• Ferronickel from laterites
• Nickel bearing scrap
• Stainless steel growth broadly constant at 5-6
  per annum
• Increase in demand means around 40,000 MT of new
  capacity coming on per annum, BUT there are no
  major new refineries being built

5
Producers

• 25 producers, 14 refineries, 8 ferronickel
  smelters
• 60 comes from 4 producers
• Production being increased through brownfield
  expansion, debottlenecking of refineries but only
  4 committed greenfield projects, all owned by
  majors, mainly feeding into integrated system,
  and in part replacing mine production decline
• Only refinery expansions at Jinchuan and QNI
• No junior has successfully developed an
  integrated nickel business including a refinery
  without major refinancing

6
The Andrew Forrest Effect

• Forrest and his Murrin Murrin broke the hegemony
  of the major producers
• Juniors found they could get into the business
  some through major investment (e.g.Cawse,
  Bulong), some through producing an intermediate
  feed (e.g. Titan)
• Production of intermediate feed at lower cost
  improves the economics of nickel production,
  replaces high cost mines, does not in general add
  to total world production

7
How does European Nickel fit in?

• First producer of a product that is suitable both
  for refiners and ferronickel smelters
• First producer from heap leach at commercial
  scale
• Production in a stable EU applicant country
• Agreement with BHP B integrates up to 80 of EN
  production into QNI Yabulu refinery
• 15,000 MT pa of production puts EN at Number 12
  in terms of output of nickel units and in top 3
  in terms of non integrated intermediate
  production
• No refinery capex, take or pay, 20 available for
  trade on world market for pricing purposes and to
  give second buyer
• We do what we do best they do what they do best

8
Intermediate Feed

• European Nickel expects to produce a nickel
  hydroxide product (or products) providing direct
  refinery feed
• As shown by a number of sulphide producers, this
  is a high margin business, with low capex and
  simple operating requirements

9
Capacity Limitations

• Total refinery capacity is the limit to total
  production
• There is no shortage of nickel resources the
  limitation is capital availability

10
Illustrative list of sources of intermediate
concentrate feed to smelters
11
Illustrative list of sources of intermediate
concentrate feed to smelters
Producer

Concentrate
source

Comment



OM Group

WMC (until 2005)

Heavy reliance
on
WMC feed
Cawse

to Outokumpu. No new
MPI

replacement yet
.

Forteleza

Suitable for EN product

QNI

New Caledonia

Refinery expansion in
Ravensthorpe (2007
)

progress.
EN has agreement
European Nickel (2007
)

on offtake
of
up to 80 of
annual production

Jin
chuan

Fox Resources

Refinery expansion now to
Sally Malay

50,000 tpa projected to
Kazakhstan


100,000 mtpa by 2007
.

Glencore (from Spain)

The table is not exhaustive and is based on av
ailable commercial information.

It illustrates how, since 1997, the market for
intermediates
has developed into a major part of the nickel
business.

12
Threats to the Global Nickel Business

• Sustained high nickel price bringing on too much
  unbalanced capacity and lowering prices below
  sustainable level
• Substitution due to high prices
• EU environmental rules on use and transportation
• China hard landing