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. Last Updated: 07/27/2016

Norilsk and S. African Partner to Invest $445M in Nkomati

Norilsk Nickel, the world's biggest miner of the metal, and African Rainbow Minerals agreed to spend $445 million to almost quadruple the size of the Nkomati mine in South Africa, the companies said Wednesday in separate statements.

Annual nickel production will rise to 20,500 tons from 5,500 tons and the life of the mine will be extended 18 years to 2027, the companies said. The mine will also yield 9,000 tons of copper and 110,000 ounces of palladium and platinum each year.

"The approval cements Nkomati's long-term future as it unlocks around 1 million tons of contained nickel resources," Peter Breese, head of Norilsk's international unit, said in the company's statement.

Norilsk acquired half of Nkomati on the completion of its $6.4 billion takeover of Canada's LionOre Mining International in August. Nickel demand has surged on rising use by steelmakers. The metal gained 18 percent in the past month, the biggest advance after wheat among the commodities tracked by the UBS Bloomberg CMCI Index.

Financing for Nkomati will be drawn from "internal cash flows and by both partners when required," the companies said. Norilsk will pay African Rainbow $20 million to start the project as part of an earlier agreement concluded with LionOre.

Norilsk will invest 6 billion rand ($860 million) in Africa over three years to double nickel output using new mining technology. It will produce 295,000 to 300,000 tons of nickel this year, after incorporating LionOre's output, Norilsk said July 31. LionOre will add 80,000 tons a year of output by 2012, said Dmitry Usanov, head of investor relations at Norilsk.

Nkomati's expansion will have a "marginal" positive effect on Norilsk's stock, said Alexander Pukhayev, an analyst with Deutsche Bank in Moscow.