The axe has fallen on yet another nickel producer. Low metal prices and high operating costs have been blamed for FNX Mining‘s (FNX-T) decision today to suspend commercial production at its Levack nickel contact deposits in Sudbury.
FNX says it will make a decision at the end of the year whether to prolong the suspension, put the Levack nickel contact deposits on long-term care and maintenance, or reactivate commercial production from this part of the Levack complex.
That decision obviously will depend on the nickel price and final metal accountabilities. So far nickel prices have fallen by about 60% since the start of the year.
In Toronto at mid-day, FNX shares were down 74, or 10.88%, to $6.06 apiece. The company has a 52-week trading range of $5.02-$39.77.
Mining from the Levack nickel deposits will continue during the fourth quarter to produce about 35,000 tons of “metallurgical test” production, FNX says.
Those tons will be stockpiled until a critical volume is achieved and will then be shipped to the company’s processor for batch processing.
This batch test, along with other metallurgical test work, will help finalize metal accountabilities for the Levack nickel contact deposits.
The company says it doesn’t expect the suspension will cause any layoffs. Employees affected by the decision will be transferred to FNX’s McCreedy West mine, Rob’s deposit, Podolsky mine, or development work on the Levack footwall deposit.
The Levack nickel contact deposits do not contain any precious metals and the suspension from these deposits will not affect FNX’s precious metal production and its agreements with Gold Wheaton Gold Corp., FNX maintains.
The Levack complex consists of the Levack nickel contact deposits, Rob’s transitional copper-nickel-precious metal deposit, the Levack footwall high-grade copper-nickel-precious metal deposit, McCreedy West nickel contact deposits and the McCreedy West PM copper-precious metals deposit.
The suspension — combined with operational changes during the third quarter — will lower the production of tons and payable metal this year.
FNX expects to produce about 1.3 million tons of ore yielding payable metal of about 13.5 million lbs. of nickel, 38 million lbs. of copper and a total of 56,000 oz. of precious metals.
The tons and payable metal produced from the Levack metallurgical batch test and the bulk sample in the first quarter 2008 from the Levack footwall deposit, were not included in the new forecast.
The company says it will now concentrate on its highest margin and most profitable deposits and development programs at the Levack footwall deposit, Rob’s deposit and the Podolsky mine will continue to move forward.
The Toronto-headquartered company has 84.73 million shares outstanding.
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