OREANDA-NEWS. African Rainbow Minerals Limited (ARM) and Norilsk Nickel, 50:50 JV owners of the Nkomati Nickel Mine in the Mpumalanga Province in South Africa, announced the approval of a R3.2 billion ($445 million) Phase 2 Large Scale Mining Expansion to increase average annual nickel production to 20,500 tonnes from 5,500 tonnes and extend the life of mine by 18 years to 2027, the press-service of Norilsk Nickel reports.

Peter Breese, Chief Executive of Norilsk Nickel International, commented: "Approval of the Phase 2 Expansion cements Nkomati's long term future as it unlocks around 1 million tonnes of contained nickel resource and quadruples annual nickel production to 20,500 tonnes. Norilsk Nickel is planning to invest R6 billion (+/-$830 million) in Africa over the next three years to double nickel production and implement the innovative Activox technology. The expansion also delivers a powerful boost to the regional Mpumalanga economy through this large direct investment and the creation of new employment opportunities. The recent successful delivery of the Interim Plan on time, within budget and with zero lost time injuries by Nkomati project team bodes well for this project."

ARM Chief Executive Officer, Andrew Wilkens said: "The Phase 2 Large Scale Mining Expansion takes ARM to the next level of becoming a larger producer of nickel, in line with our 2 x 2010 strategy, and at an operational cost which is globally competitive."

The Phase 2 Large Scale Mining Expansion will exploit two zones of the large layered polymetallic disseminated sulphide resource, which contains 904,335 tonnes of nickel. The first is the Main Mineralised Zone (MMZ) which is currently being mined by the Interim Phase through underground and open pit mining. This is overlayed by the Peridotite Chromititic Mineralised Zone (PCMZ) which will be mined by open pit mining. In addition to nickel, by-products of PGMs, chromite, copper and cobalt will also be recovered.
Mining will continue from the underground mine, at the rate of 47,000 tonnes per month (tpm), and the development of two new open-pits, Pits 2 and 3, which will produce 578,000tpm of ore at a steady state of production. The average mill grade for the total project is expected to be in the order of 0,4% nickel, over the life of mine.

Project Economics
The project assessment was based on a capital cost of R3.2 billion ($445 million) in May 2007 terms and an average nickel cash cost forecast of $3.57/lb. This will result in an after-tax real IRR greater than 20%. The project will be funded from Nkomati internal cash flows and by both partners when required. The release of the project triggers the $20 million payment by Norilsk Nickel to ARM in accordance with the original transaction.