Belvedere Resources Limited (BEL-TSXV)
August 27, 2010 Issue
The Most Powerful Name In Corporate News and Information
Having Recently Restarted Production On Their Hitura Nickel Mine In Finland, For Very Low Capital Cost, Belvedere Resources Limited Is Well Positioned To Finance And Advance Their Future Gold Projects
Belvedere Resources Limited is a
Canadian incorporated mining company with a primary focus on gold, nickel,
copper and cobalt in Finland. With production restarting in July 2010, work
is currently underway to ramp-up production from its Hitura Nickel Mine to
full production by January 2011. In addition, the company has a considerable
portfolio of advanced gold properties in Finland and plans to use the
extensive mining experience developed in the company to rapidly progress
these towards production.
CEOCFO: Mr. Pym, there have been changes at Belvedere Resources recently, would you give us a general overview?
The company recently restarted production on the Hitura Nickel Mine, which
puts us back among the producing companies club. We also have a number of
advanced gold properties, which we are focusing on bringing into production
in the near future. We saw the nickel production as a low capital cost way
of getting back into production and helping to finance future gold
CEOCFO: Would you tell us a little bit about the mines?
Mr. Pym: Our Hitura Nickel Mine is in Finland. It opened in 1970 and it has been producing ever since. The mine was developed by Outokumpu, the Finnish state owned mining company and stainless steel producer, who decided to exit the mining business to concentrate on their stainless steel smelting and refining business. They consequently sold off all of their mining assets and we bought the mine from them in 2007 giving us instant nickel production. When the nickel prices crashed from their peak of $50,000 a tonne in mid-2007 to $9,000 a tonne in October and November of 2008, we had to, in common with many other nickel producers, put the mine into care and maintenance. Eventually the subsidiary that held the mine was forced into bankruptcy. We re-purchased the mine back from the administrators in February of this year for a Euro and brought it back into production by July, which is an excellent result.
CEOCFO: What is the market for nickel today?
Mr. Pym: Nickel is predominantly used in stainless steel and traditionally the nickel market has tracked the stainless steel markets very closely. There is significant end use developing in other areas outside of stainless steel such as batteries and catalysts. However, stainless steel is still by far the largest end use material. Predicting the nickel price is quite a tricky one, everybody has a stab at it, and most people have got it quite wrong in the past. At the moment nickel is forecast to be in under-supply all of this year and potentially into 2011 as well. Overall the nickel market potentially could go into over-supply in the end of 2011-2012 if some of the big nickel laterite projects come in, as they were planning to do several years ago, this is by no means certain however as witnessed by the recent high profile closure of BHP’s Ravensthorpe Nickel Mine in West Australia. After long delays and cost overruns, with over $3-billion US in capital costs, it was closed and sold within a year of opening because it just wasn’t economical. Vale’s Goro project has been subject to similar delays and cost blowout’s. In short, it is not yet clear if future production from these projects is going to come on-stream on time, and if it is actually going to be profitable to run them. So there is a lot of uncertainty in the nickel market going forwards. If the large nickel projects come on stream as advertised, then there will be a nickel surplus in the medium term capping prices, if there are any further delays or cancellations of new projects we could have large price spikes of nickel again.
We have several strategies in place to deal with future low nickel prices should they arise
We de-risked the start-up of this project by putting in a fixed price nickel arrangement for the first eighteen months with our off take provider. We have a floor price, which allows us to produce profitably, and if the nickel market goes crazy again during the term of the fixed price arrangement, we get upside participation as well.
We have gold
asset that are coming on stream and we can either produce nickel in parallel
with our gold asset on the same site, or we can swing produce the nickel if
we want to and produce gold when the nickel price is down and then swing
back to nickel.
Would you tell us about Belverdere’s gold properties?
CEOCFO: Why are the advantages of mining in Finland?
Mr. Pym: There are a number of reasons why we like Finland. Firstly, the rocks are very prospective; it is a pre-Cambrian shield area similar to Canada, Australia or Brazil. Those rock-types are very prospective on a worldwide basis. Secondly, prior to 1995, when Finland joined the European Union, basically foreign companies were not encouraged to explore. You had the state mining company and a few private Finish companies, but that was the Finish mining industry. So there was no history of competitive foreign mining until 1995. You had the junior mining crash that happened in 1997, and consequentially there really has been no new investment, mining wise, in the country until 2001-2002. We then had a couple of big mines come on stream, but they were mines that had already been found in the past and as far as exploration potential, Finland has barely scratched the surface at the moment. So it is a good address. The other reason is it is part of the European Union. It is stable politically, mining law is well defined and title is secure. The tax situation is favorable with no state royalties and just a standard corporate tax. In summary, it is a good environment to operate in.
CEOCFO: What is the financial picture like at Belvedere Resources today?
Mr. Pym: We did a small capital raise a couple of months ago in the middle of the European Euro crisis and the Greek debt crisis, and that was quite hard to get off the ground. Financial markets at the moment are pretty soft, and we are in final negotiations with an investment bank for a capital loan to cover working capital till the revenue stream from the mine catches up. We are looking for a very modest amount of money at the moment; about €2 million.
CEOCFO: Make the case for potential investors; why does Belvedere stand out from the crowd of mining companies?
Mr. Pym: I just
don’t think there are any of our peers, with a market capitalization of less
than $20 million Canadian, who are doing what we are. Our forecast revenues
for the nickel operation alone is over $40 million Canadian for the next 18
months and that is not even valuing the gold projects at all. We aim to be
ramping up gold production to becoming a 30,000 ounce per-annum producer
from the end of 2012. Therefore, our investment upside is very good.
I just don’t think there are any of our peers, with a market capitalization of less than $20 million Canadian, who are doing what we are. Our forecast revenues for the nickel operation alone is over $40 million Canadian for the next 18 months and that is not even valuing the gold projects at all. We aim to be ramping up gold production to becoming a 30,000 ounce per-annum producer from the end of 2012. Therefore, our investment upside is very good. - David Pym, B.Sc. Geo
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