First Quantum makes $340M bet on Ravensthorpe nickel

Dec 09, 2009 | 11:55 AM | Tom Jennemann

First Quantum Minerals Ltd. has made a $340-million bet that it can succeed where BHP Billiton failed and operate the troubled Ravensthorpe nickel and cobalt operation in Australia, despite doubts about the logic of opening a laterite nickel mine at a time when there is already a market surplus.

Vancouver, British Columbia-based First Quantum emerged late Tuesday as the surprise new owner of the mine, which BHP has been trying to sell for some time. The deal, which is subject to regulatory approval in Australia, is expected to be completed in the first quarter.

BHP completed construction in 2007 but operations were suspended in January after three-month nickel on the London Metal Exchange fell to $8,850 per tonne. BHP spent $2.2 billion in capital expenditures on the mine and in August recorded a $3.6-billion pre-tax impairment charge because of Ravensthorpe.

Philip Pascall, First Quantum's chairman and chief executive officer, acknowledges that he was skeptical when he first started the due-diligence process, given Ravensthorpe's sullied reputation. "When we first came to look at (Ravensthorpe) we did so with the same perception that a lot of people had: it was something that hadn't worked well and was stopped by BHP," he said in a conference call Wednesday.....