|
WORLD EYES CUBA’S NICKEL RESERVES Boasting 16 percent of the world’s reserves, the problem with Cuban nickel is how to get hold of it. Trade embargoes, infrastructure and a lack of investment all hinder the process. But with Castro’s rule in its last days, Meghann McDonell & Rory Carroll ask is now the time for change? The soaring price of nickel coupled with uncertainty about the Cuban government has led many to ponder the future of a country that is home to 16 percent of the world’s nickel reserves. In 2005, Cuba’s nickel reserves were estimated at 1 million tonnes, but could be as much as double that figure, according to a study by the United States Geological Survey (USGS). That’s big money, given that three-month nickel hit a record intraday high of $29,950 per tonne at the London Metal Exchange two weeks ago, almost exactly double its price a year ago. Under the US trade embargo, nickel mined in Cuba cannot be sold to the USA. That has not scared off the Chinese, though, who are currently exploring a pair of development projects. The Cubans have two government-owned plants: Punta Gourda, which sits on about 310 million tonnes of resources, at 1.32 percent Ni; and Nicaro with 59.3 million tonnes of resources at 1.2 percent Ni. Production figures are unclear for these plants, although one analyst estimated they produced a total of 42,000 tonnes in 2005. Overall Cuban nickel production was estimated at 75,000 tonnes. Cuba’s future in the hands of the Cuban people: US government When Fidel Castro, the world’s longest-living ruler, transferred control of Cuba to his brother Raul last month, the world was buzzing. Many sensed that a dramatic shift was about to occur for the nation’s 11 million citizens. But Castro has apparently recovered, and the waiting game has resumed. That may be good news for the US State Department and congress, which could use more time to implement the suggestions put forth in the latest report from the Commission for Assistance to a Free Cuba. Many of the principles contained in the report to the President were not passed before the senate adjourned for its August recess, angering some lawmakers. Still, bi-partisan support all but assures its passage when congress returns in September. The report’s recommendations include a two-year, $80 million programme to break the regime’s information blockade and to prepare for the day when the country will hold free and fair elections. Cubans can still be imprisoned for reading what they wish, accessing information from the outside world, including the internet, meeting in their homes to discuss the future of their country, running a lending library, or conducting petition drives. A spokesman for the State Department said that a transitional government dedicated to democratic principles would receive generous aid from the US. “If the Cuban people make very clear in tangible ways that there is a transition to democracy, we’re going to do everything that we can to help them through organising elections as well as other means,” Sean McCormack, spokesman for the State Department, said during a recent press conference. The commission favours helping the Cuban people bring about an end to Castro’s rule, but does not recommend sending in the USA’s already stretched army when Castro dies. (Some parts of the report are classified, so it is impossible to know what it recommends as a whole.) “A perpetuation of the status quo in Cuba through a succession among the current ruling elites would be a tragedy for the Cuban people,” wrote the authors, which include 100 participants from 17 federal departments and agencies. Toronto-based Sherritt International remains the only foreign company that produces nickel concentrate in Cuba, and they have paid a high price for doing so. Their executives and families are prohibited from travelling to the USA, and the US government sees Sherritt as directly aiding a corrupt dictator. Sherritt offered minimal participation in this story. Requests for interviews with the company’s ceo were denied. In defiance of the US government, Sherritt and the Cuban government formed Sherritt and General Nickel in December 1994 to mine concentrates along the eastern coast of the island. Ownership of Sherritt General Nickel is divided equally between Sherritt and the Cuban government. Concentrate that is mined at Moa, in Cuba’s Holguín province, is then sent to Sherritt’s refinery at Corefco in Fort Saskatchewan, Alberta. Sherritt began its $450 million, 16,000 tpy expansion of its nickel and cobalt production facility at Moa in April of this year. The company hints that more expansions are likely. “If you look at the whole eastern side, you’ll see strong deposits throughout,” a spokesman says. Though nickel concentrate reserves are plentiful, Cuba is unable to tap into them. “Right now, the problem is there is no money to modernise the nickel industry to tap into the vast nickel reserves in the country,” according to Peter Kuck, a specialist at the USGS. The company reportedly produces 33,000 tpy of nickel concentrate, all of which is sent to Fort Saskatchewan for processing, according to a spokesman for Sherritt. Sherritt’s 50-percent share of nickel concentrate production translated into 15,939 tonnes of finished nickel, refined in Canada, according to the company. General Nickel contributed almost 32,000 tonnes of the finished nickel to the market in 2005. In addition to nickel reserves, Cuba accounts for a significant amount of the world’s cobalt. The country mined 3,600 tonnes of cobalt concentrates in 2005. From this, Sherritt’s 50- percent share of the finished metal was 1,696 tonnes. The price of cobalt has not been swept up in the commodities boom to the same extent as nickel but prices, though still below the highs of late 2003 and early 2004, have risen nearly 15 percent over the last year, with 99.8 percent material currently trading around $18-19.50 per lb. Cuba’s cobalt represents about 14 percent of worldwide reserves. Given the country’s ample nickel and cobalt reserves, the supply chain within the USA will invariably be altered if Cuba opens up, according to one trader. “There is going to be a significant change in supply, as Cubans direct nickel oxide out of the country and nickel is shipped into the USA from Sherritt,” the trader says. With less than one day’s worth of reserves of nickel currently in London Metal Exchange warehouse stocks, nickel companies have been as sought after as the ore itself, with drawn-out bidding wars for Canadian nickel giants Inco and Falconbridge hogging the headlines for the last several months. If Cuba does open up, Sherritt could become a takeover target. In a post-Castro Cuba, Sherritt will be forced to reconcile its ownership with the previous owner of the Moa operation, according to traders. Sherritt’s Moa mine was formerly owned by a forerunner for Freeport McMoRan. But the company was expropriated by Castro in 1960. “The mine was all built, the town and residences for workers were built, everything was set for production and ready to go and then we were expropriated,” a spokesman for Freeport says. Freeport’s Moa Bay Mining Co switched hands and was operated by managers from the former Soviet Union until the iron curtain was lifted. The demise of the Soviet Union coincided with the drop-off in production from Moa in 1991. When concentrate output failed to improve by 1994, the Cuban government decided to sell the mine to Sherritt, according to a source at the USGS. For more than a decade, Sherritt and the Cuban government have enjoyed a duopoly over nickel reserves in the country. But if US companies get approval to re-enter Cuba, not only might Sherritt attract some acquisition attention, it could run into trouble with Moa’s previous owner. In addition to dealing with Freeport, Sherritt’s status as the sole foreign company producing Cuban nickel and cobalt will undoubtedly be challenged. “There is a need for more nickel, and there is a sizeable deposit in Cuba,” a third trader says. Several analysts suspect that a stampede of nickel producers will make a run for the country’s generous reserves once trade opens up. “The whole island is basically made of nickel. You’ve got to imagine that at some stage it will attract outside interest. But it’s like New Caledonia and because of the lack of infrastructure, it’s not a cheap place to build,” says one London-based analyst. “People are looking, but it’s not easy to get to Cuba and even if they get there, it’s not easy to know what’s going on with nickel production,” another analyst says. Some companies are doing more than just looking at Cuba’s reserves. China’s Minmetals and Citic Group have a stake in two exploration developments on the island. China became involved in Cuban nickel in 2004, when it entered a joint venture with the Cuban government at Las Caramiocas plant in the eastern Holguin province of the country. “The unfinished project was initially built by the East Germans, but was abandoned when the Soviet Union broke up, at which point about 80 percent of construction was completed,” Kuck says. The project switched hands a couple of times over the years; Minmetals now retains a 49- percent stake in the company. It signed a memorandum of understanding with the government of Cuba to invest $600 million towards the building of a ferro-nickel smelter in 2005, with projected production at 68,000 tpy of ferro-nickel, according the USGS. State-owned Cubaniquel has a 51-percent stake in the project, and as part of the agreement, Cuba was to supply China with 4,000 tonnes of nickel in 2005-2009. Further, Cuba would reportedly retain 51-percent ownership in future base-metal companies created with Chinese capital. The agreement also specified that all new nickel production would be shipped to stainless steel plants in coastal China, with the rest going to a proposed greenfield stainless steel plant in Venezuela. But since the agreement was signed, there has been virtually no activity at Las Caramiocas. In fact, the construction site near Moa has been idle for more than a decade. Minmetals is not sure when the operation will be up and running. “We are still working out details for the project. No construction date has been set,” a spokesman for Minmetals says, declining to give further information. Several challenges stand in the way of start-up in production for Minmetals. “First of all they have to bring in electrical furnaces,” Kuck says. Compounding this problem are the difficulties the Chinese have encountered in dealing with the Cuban government. A source close to the project says that talks between the parties are drawn out because the Cuban side has been making changes to plans. “It’s not an easy negotiation. The Cubans wanted the inclusion of many things. It was just a smelter initially, but later a power plant had to be included as well,” he says. A second nickel exploration project with Chinese foreign investment hovers below the radar. Citic Group retains the exploration rights over the San Felipe deposit in the Cameguay province of Cuba, about 550km east of Havana. The deposit holds about 250 million tonnes of reserves at 1.3 percent nickel, says Kuck. According to market sources, BHP completed a study of the project but stalled on investment of $1 billion necessary to proceed with development. It is unclear why BHP got cold feet on this investment, but many speculate that the company had problems dealing with the Cuban government. Citic was awarded the joint venture with Union Del Niquel in San Felipe following discussions with the Chinese Government. The agreement perhaps suggests that the Chinese have demonstrated a greater willingness to develop the deposit than BHP Billiton had been indicating. As with other nickel exploration projects in Cuba, San Felipe’s new partial owners face an uphill battle. “It is a big investment to get the operation going and the government may not be willing to do much to help,” a source says. But recently, Citic is said to have made progress on production plans, according to an analyst at Brook Hunt. ‘The whole island is basically made of nickel. You’ve got to imagine that at some stage it will attract outside interest’ The Pinares de Mayari project is another development that has avoided the headlines, and its start-up pace seems to be on par with other nickel development projects in Cuba. The Pinares de Mayari West deposit in Holguín Province is headed by Cuban-government-owned Commercial Caribbean Nickel SA. The deposit contains more than 200 million tonnes of ore of 1 percent Ni and 0.1 percent Co, according to the analyst at Brook Hunt. In 1995, Commercial Caribbean Nickel agreed to form a joint-stockholding company with WMC Australia to explore and develop the Pinares de Mayari West nickel deposit, according to nickel specialist Bill McCutcheon at National Resources Canada. But Western Mining — now owned by BHP — pulled out of Cuba in 2003, according to market sources. Some industry experts project that the Las Caramiocas and San Felipe operations may have better production success under new Cuban leadership. Once such projects start producing nickel, some wonder if Sherritt will be capable of holding its own in a post-Castro Cuba. “The question is: is Sherritt in a position to competitively go forward?” one of the traders asks. //Metal Bulletin Monday 4 September 2006 |
|
| aus der Diskussion: | Sherritt Intl: Gutes aus Kuba! |
| Autor (Datum des Eintrages): | Homedelivery (04.02.07 11:38:10) |
| Beitrag: | 15 von 36 (ID:27412251) |
| Alle Angaben ohne Gewähr © wallstreetONLINE | |