Royal Nickel rises on deal with stainless steel maker

Tue Mar 12, 2013 1:14pm EDT
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* Canadian company announces non-binding deal with Tsingshan

* Tsingshan will consider an offtake agreement

* New plant would process nickel sulphide concentrate

TORONTO, March 12 (Reuters) - Shares of Canada's Royal Nickel Corporation rose 17 percent on Tuesday after the company said it had signed a non-binding agreement with one of China's top stainless steel producers.

In the memorandum of understanding, Tsingshan Holding Group Co Ltd has agreed to build a plant to process a type of nickel sulphide concentrate that Royal Nickel expects to produce at its Dumont project in Quebec.

Tsingshan will consider making an offtake proposal once Dumont's feasibility study is complete. That study is expected by the middle of this year.

If the plant goes ahead, it will be the first time nickel sulphide concentrate is used directly to create stainless steel, Royal Nickel said.

"We see great potential for the Dumont project to become a premier large scale and low-cost nickel mine and a great source of feed for our operations for many decades to come," said Tsingshan's Chairman Xiang Guang Da in a release.

With traditional financing scarce, junior companies in the mining sector have been turning to alternatives like offtake agreements to keep their projects moving.

In November Royal Nickel filed an environmental and social impact assessment for Dumont, which is about 450 kilometers (280 miles) northeast of Montreal. Tsingshan is China's largest privately-owned stainless steel producer.

Royal Nickel's shares rose 17 percent to 38 Canadian cents on the Toronto Stock Exchange. (Reporting by Allison Martell; Editing by Nick Zieminski)