OAO GMK Norilsk Nickel, the world's biggest nickel miner, agreed to acquire a stake in Canadian Royalties Inc. and buy metal from the company's C$466 million ($466 million) Nunavik project in Quebec.
The nickel concentrate will be sold under terms ``highly competitive with market rates,'' Val D'Or, Quebec-based Canadian Royalties said today in a statement. Moscow-based Norilsk will pay C$25 million for 7.25 million Canadian Royalties shares at C$3.45 each, 23 percent more than the Sept. 28 closing price.
``Forming this strategic partnership with Norilsk Nickel reduces several project risks, including risks related to the financing of the project,'' Richard Faucher, Canadian Royalties' chief executive officer, said in the statement.
Nickel prices have more than doubled in the past two years as China's demand for the stainless-steel ingredient soared. Norilsk in 2003 acquired a controlling stake in Stillwater Mining Co. to add mines in the U.S. and expand beyond Siberia. Norilsk this year bought control of LionOre Mining International Ltd. to gain operations in Australia and southern Africa.
Canadian Royalties rose 34 cents, or 12 percent, to C$3.14 at 4:15 p.m. in Toronto Stock Exchange trading, the biggest gain since May 3. The shares have climbed 25 percent this year, valuing the company at C$290.3 million.
Nunavik is scheduled to start production in the second quarter of 2010. Annual output will average 11,800 metric tons of nickel, 17,600 tons of copper and 425 tons of cobalt in concentrate in the first four years, Canadian Royalties said on its Web site. The mine also will yield 14,500 ounces of platinum and 78,600 ounces of palladium a year, the company said.
Canadian Royalties is in talks with five banks -- two each from Europe and Australia and one from Canada -- on financing for the project, Jens Zinke, the company's vice president of business development, said in a telephone interview.
Terms of a loan agreement will be decided within ``days or weeks,'' and permits for construction will probably be issued by the start of next year, he said.
Canadian Royalties said it may request a C$25 million loan from Norilsk to finance completion of the project.
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