European Nickel making progress on Caldag project talks, BHP Billiton to release full off-take

European Nickel PLC (AIM: ENK) said it is continuing to make good progress towards finalising the conditions pre-requisite for completing the project funding for its flagship Caldag project in Turkey by the end of 2009 as it reported interim results.

Negotiations with BHP Billiton (LSE: BLT, ASX: BHP) are progressing well, and talks are focused on BHP releasing all of the Caldag off-take rather than the 50 percent it had agreed to previously. The new remit has prolonged the negotiations somewhat, but European Nickel believes a full exit will assist with the project funding process.

Provided the talks are concluded as expected, it expects Jiangxi Rare Earth and Rare Metals Tungsten Group Co Ld will then take 100 percent of Caldag mixed hydroxide product, and not 50 percent as previously envisaged.  

MD Simon Purkiss said: "The next key step in advancing the financing of the Caldag project is completing the agreement under which BHP Billiton releases its rights to the off-take.  Once this is done both the equity and the debt financing from China will progress to the next stage, on track for completion by the end of the year."

The group announced in February that financing for Caldag was ready, with China Tianchen Engineering Corporation (TCC) providing  a credit guarantee of up to US$350 million to enable a consortium of predominantly Chinese banks to arrange project financing for the project.  

At its Acoje joint venture with Rusina Mining NL (AIM, ASX: RML) in the Philippines test work continues to demonstrate that the ore gives high recoveries and leaches rapidly, in comparison with many other deposits.  Construction of the heap leach trial site is progressing well.  Construction of a heap pad and ancillary facilities have been completed.  The heap will be stacked and irrigation will commence in some three months time.

The data from this testwork will be incorporated into the definitive feasibility study, which is still on course to be completed in 2010. European Nickel expects to release some intermediate results from this trial to the market later on in the year.

The outlook, from a broader market perspective, seems more positive for the remainder of the year than was anticipated earlier this year, the company said. The equity markets have rallied, China is seemingly back in the commodities market and the nickel price has
strengthened.  “However, despite these encouraging signs, we are still finding funding from Western banks is extremely tight and investors are cautious.  ...We continue to operate and manage costs prudently while waiting for full confidence to return,” it added.

The group also reported that in the six months to March 31 2009, pretax loss widened to US$10.6 million from US$6.4 million a year earlier.