Study adds 9 years to Canadian Royalties nickel project

The mine life for Canadian Royalties‘ (CZZ-T) Nunavik Nickel project could be doubled to 18 years by mining the Mequillon deposit, a preliminary economic assessment says.

The study found the Mequillon deposit has enough open pit and underground resources to support 9 additional years.

Using both indicated and inferred resources, the study estimates that the entire deposit would produce 9.2 million tonnes grading 0.68% nickel, 0.96% copper, 0.6 gram platinum per tonne and 2.3 grams palladium per tonne.

The deposit’s internal rate of return is thought to be 33% with a net present value of $53 million using US$8 per lb. nickel and US$2 per lb. copper.

With nickel at US$10 per lb. and copper at US$2.50 per lb. the IRR is 107% and the NPV would be $260 million.

Capital costs were set at $69 million up front and $15 million in sustaining capital, giving the project a 2.8-year payback period.

It was assumed that Mequillon would be developed using conventional open pit and underground mining methods. Production, at 1 million tonnes per year, wouldn’t start until after the 9 years expected to deplete reserves at the Mesamax, Ivakkak and Expo deposits, which were the focus of a bankable feasibility study. The Expo concentrator would be used as well as other existing infrastructure from the project.

Canadian Royalties has begun construction of the $466-million project already with production aimed for the second quarter of 2010. The company plans to mine at rate of 3,500 tonnes of ore per day (1.28 million tonnes per year) to produce 26 million lbs. nickel in concentrate, 38.8 million lbs. copper in concentrate, 900,000 lbs. cobalt in concentrate, 14,500 oz. platinum and 78,600 oz. palladium per year.

The company is also working on the nearby Allamaq deposit, discovered last summer. The first resource estimate for Allamaq will be out by the end of the first quarter.

The Nunavik nickel projecct is located 20 km south of the Raglan nickel mine operated by Xstrata Nickel, a subsidiary of Xstrata (XSRAF-O, XTA-L) where about 1.1 million tonnes of ore is produced each year.

Canadian Royalties shares rose about 7% today, or 16, to $2.37 per share on a trading volume of 159,000.