Allegiance upgrades Avebury nickel resource

Allegiance Mining Ltd, the Australian nickel start-up, has reported that its mine holds around 10% more nickel than previously estimated.

New exploration work has been carried out at the Avebury project in Tasmania and the resource has been upgraded from 14,000 tonnes to 172,000 tonnes.

Production at the mine is expected to begin in the first-quarter of 2008 and based on a London Metal Exchange nickel price of around $29,000 a tonne, the addition tonnage is worth around $400 million.

Tony Howland-Rose, Allegiance’s chairman, explains that further exploration could reveal the true potential of the mine and that: “The possibility for a major expansion in the size of the company’s nickel business through exploration success in coming years is very high.”

Allegiance is currently fending off a hostile takeover bid from Zinifex, which operates a mine approximately 30 kilometres from the Avebury site.

However, Allegiance’s largest shareholder, Jinchuan Group of China, has stated that the all-cash offer of an initial 90 cents a share is too low.

The Zinifex bid is the latest evidence of a consolidation trend that began in November of last year, with BHP Billiton’s proposed offer for Rio Tinto.

Xstrata is currently offering A$3.1 billion for Jubilee Mines, another Australian nickel miner while Brazil’s Vale and Russia’s Norilsk are also reported to be seeking acquisitions.