October 07, 2008

Kagara eyes nickel mine sale to fund zinc mine

Reuters reported that Australian miner Kagara Ltd hopes to solely fund development of one of Australia's largest known zinc deposits by selling an outback nickel prospect for up to AUD 1.5 billion.

Kagara has long been expected to seek out a partner to develop an underground mine costing more than its entire AUD 950 million market capitalisation at Admiral Bay in northwestern Australia, yielding 300,000 tonnes of zinc a year.

Mr Kim Robinson Chairman of Kagara told reporters at an industry conference that he would prefer to keep control of Admiral and while he sees potential for zinc prices to rebound, he is not optimistic on the future of nickel and would sell Kagara's Australian Lounge Lizard mine to fund Admiral Bay.

Mr Robinson said that "Given its size, Admiral Bay has the potential to be a real company make. We want to get rid of Lounge Lizard and develop Admiral Bay."

Nickel prices MNI3 have dropped around 40% in the last 12 months, while zinc prices MZN3 are down about 30%. But Mr Robinson sees zinc regaining ground once oversupplies are worked off, but he predicts little upside for nickel due to a rising number of low cost producers threatening to flood markets with cheaper mined nickel.