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PHILNICO NICKEL PROCESSING PLANT

Project Overview

The Philippines will be back as a major nickel and cobalt producer again soon!!!

After being mothballed in 1986, the Surigao Nickel Plant is now to be rehabilitated by Philnico Industrial Corporation ("PIC") using the more recovery efficient pressure acid leach (PAL) process. The processing plant will produce intermediate nickel-cobalt sulphide product which will be shipped to Impala Platinum’s expanded refinery at Springs, South Africa for refining into Class I nickel and high purity cobalt metals.

Technical feasibility studies have been completed by Kvaerner Metals of USA ("KM"), a subsidiary of the Anglo-Norwegian construction group Kvaerner ASA, based on the production of mixed sulphides using the PAL process. The corresponding metallurgical testwork program was carried out by Dynatec of Canada, which also served as process consultant to the Project.

The Project features existing plant and infrastructure on Nonoc Island and neighboring South Dinagat Island that may be reused in the new process, and an extensive resource base of 144.7 million tonnes with an average grade of 1.10% Ni and 0.11% Co. The Project site has been declared as a Special Economic Zone with PIC as designated developer. The ECOZONE provides significant fiscal incentives to the Project and future industrial locators.

Comprehensive environmental program and management plans are in place. These are embodied in the approved Environmental Compliance Certificate (ECC) based on the submitted Environmental Impact Statement (EIS).

Project Location, Access and Climate

Nonoc Island lies about 8 nautical miles to the northeast of Surigao City on the northeastern tip of Mindanao. The island may be reached by private or chartered aircraft on a 1300-meter concrete airstrip capable of handling aircraft as large as Hercules C-130 cargo planes. Large ships up to 60,000 dwt can berth at the two existing port facilities designed to receive coal boats, oil tankers and general cargo. Nonoc is also accessible by a 30-minute ferry ride from Surigao City, which in turn is serviced by commercial aircraft and boats from Manila and Cebu.

The climate of Surigao Province is distinctly tropical and is characterized by alternating wet and dry seasons. Mean daily temperature vary from a low 18oC during December-January to a high 28oC during August-September. Mean relative humidity is 85%. The northeast monsoon wind blows from mid-October to March and brings heavy rain. The average annual rainfall is 143.9 inches and varies from a monthly maximum of 25 inches during December-January to a minimum 5 inches during June-July. During dry season, the southwest monsoon brings low to moderate wind and rainfall.

Ore Resources and Mining Plan

The Project is in the southern coast of Nonoc Island, right at the center of the 250,000-hectare Surigao Mineral Reservation (SMR). Contained within the SMR is an estimated 677 million tonnes of nickel-bearing laterite deposits divided into four parcels.

The Project’s 25,000-hectare Parcel II and portion of parcel III Mineral Production Sharing Agreement (MPSA) lease area alone features a resource base of 144.7 million tonnes with an average grade of 1.1% Ni and 0.11% Co at a cut-off grade of 0.90% Ni. This estimate was based on a Resource Update Study conducted by Minproc Limited (Minproc) Perth, Australia in 1999 and audited by an independent geological consultant.

The Mine Plan contemplates to supply the processing plant with 2.5 million dry tonnes per annum of ore within the MPSA. This will be supplemented by 1.0 million dry tonnes per annum of ‘imported ores’ coming from neighboring mining areas controlled by third parties. A blended ore feed grade of 1.3% Ni and 0.14% Co is programmed for 20 years based on potential source that could last in excess of 40 years.

Project History

The potential of the area as a large source of nickeliferous mineral was first recognized in the 1950’s after initial exploration that was carried out by the Philippine Bureau of Mines, during which time the area was proclaimed as a Mineral Reserve.

In 1967, following metalurgical testwork at the Sherritt Gordon Mines test facilities in Canada, Marinduque Mining and Industrial Corporation (MMIC) submitted a proposal to the Philippine government to complete an assessment of the property and in 1968 was granted an Operating Contract with the right to mine and operate within stipulated areas (Parcel II) of the Surigao Mineral Reservation (SMR).

In 1970, Arthur D. Little and Associates were commissioned to perform a feasibility study which subsequently led to the development of the Project. That same year, the engineering and construction firm Bechtel Corporation began the design phase of the Project adopting the modified Reduction Roast – Ammoniacal Ammonium Carbonate (Caron) Process. Construction was completed in July 1974 and commercial production started in December 1974.

 

The plant continued to operate from that time on, through its foreclosure by the government in 1984, until it was shut down in March 1986 mainly for economic reasons. During the period of the plant’s operation, a total of 22.7 million tonnes of ore were mined and processed at an average grade of 1.24% Ni, 0.13% Co and 41.4% Fe.

Since the shutdown of the plant, the government has progressively taken steps via the Assets Privatization Trust (APT) to attract foreign investment into the rehabilitation of the Project. In September 1989, Philnico Mining and Industrial Corporation (now known as Philnico Industrial Corporation, PIC), controlled by the Cabarrus Group which owned the property before the 1984 government foreclosure, purchased the refinery from the APT. Rehabilitation of the plant was initiated but was not completed.

 In May 1995, Pacific Nickel Holding Ltd (now known as Philnico Holding Ltd., PHL) acquired 90% of the shares in PIC and the rights and interests of PIC in the Project. A Project Feasibility Study (PFS) was commissioned in 1996 into the proposed rehabilitation of the refinery employing the same Caron process. The study and associated business review concluded that it would not be economically feasible to redevelop the Project on this basis. In February 1998, another PFS was performed on the conversion of the plant facilities from the Caron process to Pressure Acid Leach (PAL) process with the objective of reusing as much of the existing facilities as possible. The results concluded better financial returns for the Project.

In February 2000, Impala Platinum (Implats), the world’s second largest platinum producer, announced its intention to acquire a 25% interest in the Project and funded a revised Bankable Feasibility Study based on the strategy of splitting the Nonoc operation such that Nonoc will produce mixed metal sulphides as intermediate product which is then shipped to Implats’ refinery for refining. The study was completed in September 2000.

Infrastructure

Water requirement of the Project is sourced from the 4,448-hectare Sabang River Watershed and man-made Sabang Dam, located at the nearby Dinagat Island, north of Nonoc Island.

The reservoir holds a volume of 22 million cubic meters of water solely for the use of the Project. A pumping station with a total rated capacity of 21,000 gallons per minute (3 x 7000 gpm) supplies water, via a 27-km long, 30-inch diameter pipeline, to the plant facility where it is clarified, filtered and chemically-treated for plant and domestic use. Power to the pumping station is supplied by the Nonoc power plant via an overhead transmission line. The pumping station has a back-up 2.0MW diesel power plant on site.

The existing Coal Pier can accommodate Panamax-size vessels while the Oil Pier can accommodate 60,000 DWT tankers. Both piers can also handle incoming and outgoing dry cargoes.
The airstrip is 3 kilometers away from the plant. It is of heavy concrete construction, 1,300 meters long and 30 meters wide and capable of handling fully loaded Hercules type aircraft. There is also parking apron, hangar and a waiting room.
 
The Nonoc plant has been supplied with electrical power and process steam from its own facility consisting of two coal-fired boilers and three 20MW turbine generators (two backpressure and one condensing). Due to significant changes in the power and steam requirements of the Project, the following changes will be made: This arrangement is aimed to provide sufficient redundancy to ensure that no single major failure will restrict the operation of the plant. The tank farm located on Nonoc Island is capable of storing the following consumables:

-  750,000 bbls of bunker fuel oil 3 tanks
-  210,000 bbls of naphtha 2 tanks
-  10,000 bbls of gasoline 5 tanks
-  1,000 tonnes of liquid caustic 1 tank
-  160,000 gallons of LPG 2 tanks
-  10,000 bbls of automotive diesel fuel 2 tanks
-  20,000 tonnes of anhydrous ammonia 1 tank

Other infrastructure includes:

-  Telecommunication facilities (PLDT, BayanTel and Philcom) for voice and data applications;
-  Domestic water distribution system;
-  Workshops and warehouse buildings;
-  Schools
-  Electrical transmission and distribution lines;
-  Company housing (730 units, to be refurbished)

Local Community

The local population numbers approximately 4304, concentrated in the three barangays or local villages located outside the boundaries of the nickel deposits. This arises from the inability of lateritic soil to support growth of food crops. Main source of livelihood is fishing.

Project Business Strategy

Nonoc was originally developed as an integrated mine and refinery treating the mining reserve on Nonoc Island using the modified Caron Process developed by Sherritt Gordon Mines of Canada. The key constraints of the process that led to the Project’s unprofitable operation and eventual shutdown in 1986 were:

In 1998, one year after an unsuccessful study exercise to redevelop the Project using the same process showed unattractive rate of returns, the sponsors of the Project considered converting to the Pressure Acid Leach (PAL) process. The conclusions of the pre-feasibility study were very encouraging and led to the go-signal to perform a more accurate Technical Feasibility Study (TFS).

Extensive metallurgical testwork has been undertaken by Hazen Research and, most recently, by Dynatec of Canada upon which the technical design of the second generation PAL process has been based. The more recent work in particular incorporates many of the improvements which are intended to avoid the problems encountered in Western Australia’s three new PAL projects.

Dynatec has also joined the owner’s team as process design consultant in the preparation of the revised technical feasibility study together with Kvaerner Engineering & Construction of USA (a subsidiary of Kvaerner ASA) as engineering and construction manager.

With the commitment of Impala Platinum of South Africa to acquire a 25% interest in the Project, a revised Technical Feasibility Study was conducted and completed in September 2000 by a joint study group of Philnico, Dynatec and Kvaerner with the concept of splitting the Nonoc operations into two stages:

The move is aimed to reduce the initial capital cost of the Nonoc Project and reduce the operating cost of the expanded Springs refinery.

Based on the September 2000 TFS, the Project’s average cash operating cost for mixed metal sulphides production is projected at the lowest quartile among the world nickel producers.

The Project benefits from the existence of substantial plant, equipment and infrastructure, including existing thickeners, liquid and solid storage facilities, power and water plants, wharves, airstrip and housing units. The Project has acquired the following major government permits and approvals:

 
Ecozone
 

The Project site has been registered as a Special Economic Zone for heavy industries (ECOZONE) with Philnico Industrial Corp. as the designated developer.

 

 

The existence of support infrastructure makes the ECOZONE very viable. A 590-hectare area has been envisaged. Development is scheduled in 5 phases; the first phase covers 106-hectare inclusive of the 60-hectare site now occupied by the processing plant.

The ECOZONE provides significant fiscal incentives and favorable tax holidays to the Project and future industrial locators.

For more info on Philnico Industrial Estate Special Economic Zone, please see this site:  http://dtisdn.tripod.com/nisez.htm.

For more information please contact  Mr. Evaristo M. Narvaez, Jr., President-Philnico Industrial Corporation, Rm 11-2, 11/F Manila Banking Corp. Bldg., 6772 Ayala Avenue, Makati City. Tel. Nos. (0632) 867-4334 thru 41, 816-7026, Fax No. (632) 816 7039 or Mr. Victoriano C. Nuñez, Officer In Charge, Plantsite and Minesite, Nonoc Island, Surigao City. Tel. No. 086- 826-2113 / 14

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