Sherritt To Buy Controlling Stake In Indonesian Nickel Project

Sherritt International Corp. (S.T) will acquire a 57.5% equity stake in the holding company that owns the Sulawesi nickel project in Indonesia and become the project's operator.

Rio Tinto Ltd. (RIO), Sulawesi's owner, will hold on to the remaining 42.5% stake. However, in compliance with Indonesia's Mining Law, local Indonesian interests are expected to acquire a 20% interest in Sulawesi, which will result in Sherritt and Rio Tinto together owning 80%.

That will give Sherritt a controlling interest and a 46% economic interest, with Rio Tinto maintaining a 34% economic interest.

Toronto-based Sherritt, a diversified resource company with operations in Canada, Cuba and other countries, said it has executed an earn-in and shareholders agreement in connection with the deal and has also committed to fund $110 million towards producing a feasibility study from which a development decision will be made.

Sulawesi currently ranks as one of the largest known undeveloped, greenfield lateritic nickel deposits in the world, Sherritt said.

Back in March, Rio Tinto said it had been given a mining permit for the $2 billion nickel project, making it the first company to gain investment approval under Indonesia's new mining law. It said it would review its options for development of the project.

Wednesday, Sherritt said it will license its "commercially-proven, proprietary technology to the project."

Sherritt is also a partner in the Ambatovy nickel-cobalt project in Madagascar.

-By Carolyn King, Dow Jones Newswires; 416-306-2100; [e-mail]