Restarting Ops On Nickel Mines

- January 26th, 2010

By Kishori Krishnan Exclusive To Nickel Investing News
Nickel prices are on an upswing. Eager to strike when the iron is hot, miners in the midst of labor disputes, are all in a tizzy to get the show on the road.
Like Vale Inco’s Canadian operations. Striking workers at Vale’s nickel-copper-cobalt mine in Voisey’s Bay are back […]

By Kishori Krishnan Exclusive To Nickel Investing News

Nickel prices are on an upswing. Eager to strike when the iron is hot, miners in the midst of labor disputes, are all in a tizzy to get the show on the road.

Like Vale Inco’s Canadian operations. Striking workers at Vale’s nickel-copper-cobalt mine in Voisey’s Bay are back at the bargaining table.

Not just the biggies, even junior Canadian resource companies are attracting the attention of the world’s largest players. Previously unknown Duluth Metals has nailed a US$ 227-million joint venture with one of the world’s largest copper miners, London-based Antofagasta plc.

Duluth (DM) is developing a copper and nickel project in northeast Minnesota.

And to top it off, regional resources group Mwana Africa has said it is looking at ways of restarting operations at the Bindura Nickel Corporation.

Why has the wind changed direction? It is not just a complementary domestic operating environment that is engaging miners. Nickel price itself is playing an important role.

Currently trading at around $18,800 per tonne, more than double the levels seen in March 2009, nickel premiums have been driven higher.

Premiums for truckloads of plating-grade nickel increased Monday to a range of 90 cents to $1.05 per pound over London Metal Exchange prices, up from 90 cents to $1 last week.

Melting-grade spot premiums remained unchanged at between 80 and 90 cents per pound, but market participants said that more deals are now being conducted toward the higher end of the range.

Corporate scoreboard

Vale Inco‘s Canadian unit has said that it will resume production at its nickel mining and milling operations at Voisey’s Bay using non-striking labor.

Though the firm is in the midst of a six-month strike, the decision to resume production follows a breakdown in contract talks between the company and the United Steelworkers Union, Rio de Janeiro-based Vale said in a statement.

The strike has paralyzed output at the mine. Bob Carter, spokesman for Vale Inco in Newfoundland and Labrador said, the restart “enables us to provide meaningful employment for the more than 250 employees who are not on strike.”

The company had been looking for a three-year wage freeze and it also wants to roll back an employee bonus that’s tied to the price of nickel.

Vale’s Canadian operations include six nickel mines, a mill, a smelter and a refinery in Sudbury; a refinery in Port Colborne, Ontario; a nickel-cobalt-copper mine in Voisey’s Bay; and three nickel mines, a mill, a smelter and a refinery in Thompson.

This is the first major strike at Vale’s Canadian operations since Brazil-based Companhia Vale do Rio Doce bought the former Inco Ltd for $19 billion in October 2006.

Previous work stoppages at Inco have been lengthy, including a three-month strike in Sudbury in 2003 and a two-month strike at Voisey’s Bay in 2006.

In the case of Duluth Metals, there is a long established trend of domestic juniors finding and financing a property, then inviting the senior players to the party.

Antofagasta (ANTO:L), a company with a $16-billion market capitalization and massive mines in Chile, is set to pay $130-million to buy into the Minnesota property, known as Nokomis, and fund a large portion of the development costs.

The commitments add up to $227-million. Duluth kept full control of a number of other properties it owns.

Nokomis, which contains copper, nickel and platinum group metals – has an indicated resource of 550 million tonnes and a combined copper equivalent grade of about 1.5 per cent.

In the case of Mwana Africa’s Bindura Nickel Corporation (BNC), officials maintain that discussions with potential financiers have already started.

The firm is also looking at potential joint ventures with China’s Jinchuan Group, which is understood to have expressed an interest.

Mwana Africa, which recently secured funding for its gold mining operations, Freda Rebecca Mine, from a South African bank before the close of 2009, acquired a 53 per cent interest in BNC from Anglo American Corporation of Zimbabwe in 2003.

BNC is listed on the Zimbabwe Stock Exchange and is the largest integrated nickel miner in Southern African and owns the Shangani and Trojan mines as well as the Bindura smelter and refinery complex.

In addition to treating material from Trojan and Shangani, the Bindura plant has toll nickel treatment arrangements with third parties in Botswana, South Africa and Zambia to utilise spare capacity.

The recovery in nickel prices, “which are expected to remain steady throughout the year” as well as an improvement in the domestic operating environment should enable BNC to realise its full potential. Ditto for the others.

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