Philnico to decide in January on joint venture with Jinchuan

Philnico Industrial Corp. said yesterday it would make a decision next month on whether to pursue a joint venture with China’s state-owned Jinchuan Group Ltd. to reopen the Nonoc nickel mine in the Philippines.

Evaristo Narvaez, chairman of Philnico, said he was not giving up on China’s top nickel producer but said at least three other companies, from China, Russia and Japan, were interested in investing in the project.

"We are not closing the door on Jinchuan," Narvaez told a news conference. "I think January is decision time."

Jinchuan, which operates China’s largest nickel mine, and the Baosteel Group, China’s biggest steel firm, agreed in April 2005 to invest $1 billion to revive the Nonoc mine, which has the capacity to produce 41,000 tons of nickel a year.

But since then, talks between the Chinese investors and Philnico, which owns Nonoc, have been deadlocked over sharing ownership, Economic Planning Secretary Romulo Neri said earlier.

Narvaez said Jinchuan had offered Philnico a 15-percent stake in the proposed joint venture, subject to the conduct of another feasibility study on the project that will be completed in May 2007.

"It seems contradictory that they will make an offer based on a feasibility study that has yet to be done," he said, adding Jinchuan had been conducting due diligence on the project for four years.

He said two independent consulting firms, one Australian and another Norwegian, have made previous studies on the resource and the viability of the project. The firms were hired by Philnico.

"We cannot negotiate on a joint venture project that we don’t know what the outcome will be," Narvaez said.

Philnico is 55 percent owned by Hong-Kong based Compline Resources Co., about 30 percent by Australia’s Pacific Energy Ltd. and the rest by local investors, Narvaez said.

Narvaez said the deadlock in talks with Jinchuan would delay the targeted 2008 reopening of the Nonoc nickel project.

He said if his company clinched a deal next year the earliest Nonoc could reopen would be in 2009 as construction of a new processing facility would take at least 18 months.

The government wants to re-open the Nonoc nickel mine as part of plans to revive the country’s once lucrative minerals sector, which would boost economic growth and improve state finances.

In July, Jinchuan said it had signed a debt accord with the government and Philnico.

Philnico has sought to settle some $300 million of debts stemming from the mid-1990s when the company bought the mine from the government.

Nonoc Island, with a land area of 5,825 hectares, has more than 144 million tons of nickel ore reserves, according to the Mines and Geosciences Bureau of the government.

The deposit at Nonoc was mined from 1975 to 1982, with annual production at between 9,600 tons and 25,000 tons of nickel. It was closed due to high energy costs.

At least three separate Memorandum of Understanding (MOUs) on a $1-billion investment by Jinchuan in Philnico had been signed with no less than President Arroyo witnessing the signing ceremonies.

The deal has been delayed for various reasons including the settlement of the outstanding debt of Philnico.

Jinchuan intends to redevelop Philnico into a large-scale nickel and cobalt mining and processing complex. — Marianne Go