19 Jun 2020 11:20

Nornickel sells last Australian asset - Honeymoon Well - to BHP

MOSCOW. June 19 (Interfax) - Norilsk Nickel (Nornickel) has sold its Honeymoon Well greenfield project in Australia, the Russian mining giant's last project in this country and one if its few remaining international assets.

Nornickel, through its Australian subsidiary MPI Nickel Pty Ltd, has entered into a definitive agreement with BHP Billiton Nickel West Pty Ltd, a wholly owned subsidiary of BHP Group Limited, to sell its Honeymoon Well Nickel Project for an undisclosed amount, the Russian company said in a press release.

The project, located in Western Australia, encompasses Honeymoon Well, a greenfield nickel development, as well as Albion Downs North and Jericho Joint Ventures, both exploration projects where BHP currently owns the remaining 50% stake.

Nornickel previously estimated the project's reserves at 1.26 million tonnes of nickel, and capital expenditures on the project were estimated at $1.5 billion.

"With the sale of Honeymoon Well Nickel Project we complete the strategic exit from Australian operations and reinforce our focus on the development of our Tier-1 asset portfolio in Russia. We are grateful to BHP as our JV partner in Australia and appreciate their commitment to prompt execution of the transaction", Sergey Dubovitsky, Nornickel's Senior Vice President for Strategy, Strategic Projects, Logistics and Procurement was quoted as saying.

The deal is subject to regulatory approvals and other customary closing conditions, the company said. Citigroup acted as a financial advisor to Nornickel on the deal.

BHP has an in-depth knowledge of the project, which is expected to streamline the closing of the transaction, Nornickel said.

Nornickel acquired its Australian assets, including Honeymoon Well, in 2007 in the course of its purchase of LionOre. This deal, made at the peak of the resource cycle, cost $6.4 billion and was the biggest ever in Nornickel's history.

The main Australian asset was Lake Johnston, which was the only operating asset for a long time (except in 2009-2011, when the plant was mothballed), producing about 3% of the Nornickel Group's nickel. In 2013, soon after Vladimir Potanin took over day-to-day management of the company, Nornickel put its assets in Australia, Botswana and South Africa up for sale because they did not meet profitability criteria and did not fit into a strategy that called for focusing on operations in Norilsk, Russia.

The first Australian assets to be sold were gold mining assets - North Eastern Gold Operations or Thunderbox Operations - in 2014 in a deal worth AUD100 million, including deferred payments and tax payments from the moment production resumed. Lake Johnston was sold for $1 million, and the mothballed Black Swan mine and Cawse leaching plant were sold for $1.5 million.

Nornickel has not managed to sell its Nkomati nickel mine in South Africa, in which it holds a 50% stake. Botswana's BCL signed a binding agreement to buy it, but refused to fulfill its obligations. Nornickel is suing for losses in the London Court of International Arbitration. Nornickel and its partner in this joint venture, South Africa's African Rainbow Minerals (ARM), have agreed to close the mine due to its unprofitability.

Nornickel's only remaining foreign asset is now the Harjavalta nickel refinery in Finland, which is part of the group's production chain, processing concentrate from its Kola MMC division. It is also gearing itself toward production of batteries for electric cars. Germany's BASF is building a plant next to Harjavalta that will use raw material from the Nornickel refinery to manufacture 300,000 electric vehicle batteries annually.