precious metals to reopen wa mine

PMA will need more money, unfortunately. However, I think they got a good deal, given that the original mine cost $120 mill and Xstrata paid most of that.

Regards

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Precious Metals to reopen WA mine
August 9, 2005 - 7:30PM

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Precious Metals Australia could restart production at the troubled Windimurra vanadium mine in Western Australia within 12 months after receiving the final $10.5 million payment from former joint venture partner, Swiss based miner Xstrata.

The mine was controversially closed in 2003 when Xstrata said the vanadium price was too low to justify the operation.

In an out of court settlement Xstrata agreed to pay Precious Metals in compensation after Precious Metals alleged Xstrata closed the mine prematurely.

Precious Metals executive director Roderick Smith said it was rewarding to regain control after relinquishing it to Xstrata in 1997.

"It is a harsh way to have recovered the asset but we got there and in the end Xstrata were extremely cooperative," Mr Smith said.

He said in total Precious Metals had received over $20 million in payments from Xstrata, including the court settlement.

Xstrata now has no obligations in terms of rehabilitating the site.

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AdvertisementThe vanadium price is enjoying a boom in price following the closure of another vanadium mine in South Africa and strong demand from China.

Vanadium is trading between $US10 and $US12 per pound, said Mr Smith, compared to $US1.40 it reached when the mine was closed.

Mr Smith admitted the new supply to the market from Windimurra could have a downward impact.

He said Precious Metals would upgrade the project to produce ferro-vanadium, a product which fetches more in the market place than vanadium pentoxide, which the mine previously produced.

The previous mine had a nameplate capacity of 17.6 million tonnes a year but only ever reached production of 12 million tonnes a year.

Precious Metals is now considering production of 20 million tonnes a year with development costs put at $100 million.

Precious Metals will conduct a six month study on the condition of the project before undertaking six months of refurbishment to bring the project back online.

"We have to look at the amount of plant that has been left behind and reassess the cost of reopening it," said Mr Smith, but he thought there was still considerable value in the remaining plant.

Vanadium is mostly used to produce high strength steel and is used in the aerospace and nuclear industries.

Precious Metals was in a trading halt pending an announcement about the project.

Prior to the trading halt it was trading at 73 cents.

© 2005 AAP