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 tons of contained nickel resource and quadruples annual nickel production to 20,500 tons. Norilsk Nickel is planning to invest R6 billion ($830 million) in Africa over the next three years to double nickel production and implement Activox technology.

“The expansion also is expected to deliver a 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 CEO André 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 expansion will exploit two zones of the large layered polymetallic disseminated sulphide resource, which contains 904,335 mt of nickel. The first is the Main Mineralized Zone (MMZ) which is currently being mined by underground and open pit methods. This is overlayed by the Peridotite Chromititic Mineralized Zone (PCMZ) which will be mined by open pit methods. 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 mt per month. Development of two new open-pits will provide another 578,000 mt per month of ore at a steady state of production. The average mill grade for the total project will be about 0.4% nickel, over the life of mine.

The existing 100,000-mt-per-month concentrator will be upgraded to 250,000 mt per month to process the PCMZ ore and a new 375,000-mt concentrator for the MMZ will be constructed to give an overall concentrator capacity of 625,000 mt per month. The mine's related infrastructure will also be upgraded, including construction of two new tailing facilities and an upgrade of the power supply to 80 MVA.

Construction will commence in early 2008 and is scheduled to take 24 months. Production will be sequenced, targeting initial production ramp up from the MMZ concentrator during the third quarter of 2009, with full production by first quarter 2010, and then initial PCMZ production ramp-up targeted during the third quarter of 2010, with full production by 2011.

Average annual nickel production in concentrate is forecast to be 20,500 mt over the 18-year life of mine. By-product production is expected to be 9,000 mt/y copper and 110,000 oz/y PGMs, predominantly palladium.

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 a $20-million payment by Norilsk Nickel (previously LionOre) to ARM in accordance with the original transaction.

Nkomati has secured toll smelting and refining capacity for its concentrate. A Bankable Feasibility Study will be carried out during 2008 to examine the viability of constructing an Activox refinery for Nkomati.