New nickel projects behind schedule and way over budget

New nickel projects behind schedule and way over budget

The comments reported here a month ago from Vanessa Davidson pointing to the unreliability of production targets being met for new High Pressure Acid Leach (HPAL) nickel laterite processing plants in the article Medium term outlook for nickel: supply increases may outstrip demand growth but ”¦ was borne out in spades in this past week . The companies behind the two largest HPAL process plants currently under construction have both reported long delays and huge cost escalations.

BHP Billiton is building the Ravensthorpe nickel operation in Western Australia ”“ an integrated mine and primary processing facility now under construction at Ravensthorpe, Western Australia, located 570 kilometres by road from Perth and 155 kilometres west of Esperance.

The project involves open pit mining from three adjacent ore bodies, and a hydrometallurgical process plant to treat both limonite and saprolite ores to produce up to 50,000 tonnes per annum of contained nickel and ,400 tonnes of contained cobalt in a mixed intermediate product for further processing at BHP Billiton’s Yabulu nickel refinery in Queensland, Australia.

Now the costs of building the plant have escalated 64 percent to US$2.2 billion and it is around a year behind its original schedule.

In a statement last week the company said: ”Lower than expected labour productivity and late delivery of some materials and equipment at Ravensthorpe means that the target date for first metal ex-Yabulu from Ravensthorpe is now first quarter calendar year 2008.

President Stainless Steel Materials Jimmy Wilson said while market conditions had led to the increased capital costs, the project was still well positioned to deliver positive results.

“At the time the original cost estimate for Ravensthorpe was prepared, the current tightness and cost escalation for labour and materials, which are especially severe in Western Australia, were not apparent.

“Production is eagerly sought in a market which requires additional nickel units to keep pace with continuing strong demand. Ravensthorpe and the expanded production from Yabulu are well placed to meet part of this demand,” Mr Wilson said.
The design of Ravensthorpe benefits from an extensive understanding of existing nickel acid leach operations. The design and much of the equipment and materials have undergone extensive pilot plant testing. Scale-up factors are conservative by normal industry standards.

“We have done a lot of work to ensure that the plant will operate as designed, and that we can ramp up production at a rate which will enable nickel to be delivered to customers as early as possible,” Mr Wilson said.

Construction at Ravensthorpe is now approximately 73 percent complete with engineering and procurement activities now finalised and offsite fabrication 97 percent complete. The Yabulu refinery expansion is approximately 87 percent complete and on schedule for mechanical completion by the end of calendar year 2006.

Meanwhile CVRD Inco which is constructing a major new HPAL plant at Goro in New Caledonia as part of an integrated mining and process plant is reporting similar delays and cost escalations on its production schedule. Here the problem is also being exacerbated by continuing legal action against the nickel miner, with a French court effectively halting clearance of land on which the waste from the plant would have been dumped. So far, the company appears to have ignored the court’s decision with the apparent connivance of the local regional governor, although latest reports suggest that work on the area has halted pending an appeal.

But this may be the least of the problems facing the new project. CVRD’s president Roger Agnelli is reported as stating that stat-up of this project to produce 60,000 tonnes a year of nickel will be delayed until end 2008 and will now cost some US$3 billion ”“ a 50 percent increase on previous estimates.

Overall, the delays in the completion of these projects is likely to contribute to keeping nickel supplies extremely tight, or in deficit, for the next two years at least and nickel prices are likely to remain at high levels as a result with demand for the metal for stainless steel production continuing strong.

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