Falconbridge Dominicana is the second biggest ferronickel producer in the world. Among lateritic nickel operations, Falcondo’s capital cost is o ne of the lowest for nameplate capacity. At about $3(US) per lb of nickel, it is some one-third to a half the capital cost of its competitors. Falconbridge Ltd. owns 67.7% of t he equity of Falcondo; Armco Inc. 17.5%; corde (Dominican Corp. of State-owned C ompanies) 10%; and others 4.8%. It was 1955 when Falconbridge first expressed an interest in the nickeliferous laterite ores occurring on the properties near the city of Bonao in the Dominican Republic. The laterites of the area had been known for quite a while; in fact they have been identified by geologists around the turn of the century. Falconbridge negotiated a concession with the government in 19 56 and amended the agreem ent in September, 1969. Construction of a commercial plant with a capacity of mo re than 63 million lb of nickel in ferronickel was completed in 1971, with the f irst metal tapped Oct 9, 1971. The plant was inaugurated 15 years ago on June 21 , 1972.
The mining operation is quite straightforward; it is essentially an earth- moving operation, yet it needs a careful ore-blending program and proper equipment m aintenance. Mining costs are low and represent a fraction of the cost of product ion. However, the need for consistent high volume of shipments from the pits and specific blending requirements can be a serious bottleneck if mining is not closely monitored.
The stripping ratio is also negligible, but a lot of low grade material still has to be moved around to provide access for payable ore and to the plant. The c ompany’s shovel fleet consists of eight Poclain (French-made) units with 4 cu m buckets. In a simple digging and operation mode, no blasting is needed on 7-m be nches. Six of the Poclains are excavators and the other two are backhoes.
The present ore reserve grade of 1.91% nickel (drill-indicated) has been upgraded in recent years to reflect changing economic conditions. On a 1.6% cut-off g rade, material below is being stockpiled for the future. Mining of higher grade ore has been going on since late 1982 when the fortunes in the nickel business c hanged. The ore reserves of some 30 million tons have been restated accordingly at 1.6% cut-off (more than 60 million tons previously) and can now sustain opera tions for at least another eight years.
As a result of general capital cost control measures, emphasis is and has been more on maintenance than on buying new equipment. Incredibly, all the original truck fleet of 12 40-ton trucks is still operating, with some having clocked close to 50,000 hours. But they are mostly in light duty. That is exceptional. The present mine haulage fleet also consists of eight Wabco 70-ton units, five ph 50 -ton units and seven Caterpillar 50-ton units.
In the first few years of production, there were two areas of mining with an average distance of two kilometres to the plant. At present, three areas are being mined: Loma Caribe, Loma Taina and Loma Peguera. The average distance to the plant is now more like 10 km, with a total of 30 km of haulage roads compared to a mere 3.5 km in the early 1970s. As distances are getting longer, the need fo r equipment availability has become more crucial. Obviously the maintenance and machine shops are under close scrutiny to keep the equipment in good order. A ne w mine, Ortega, which is 48 km away, will be soon commissioned. Ortega will acco unt for about 40% of the annual ore production in a few years.
The trucked ore, after a sizing-down process, goes to sheds near the metallurgical plant. The daily tonnage delivered averages 12,000 wet tons (or about 9,000 dry tons). The ore is kept in three “mining campaigns” (storage bays) of 55,000 wet tons each. The ore is reclaimed from each storage shed with a careful grade, and chemical control and its moisture content of 26%-28% is reduced to 17%-19% in dryers equipped with screens. From there the ore is conveyed to the reductio n plant, briquetted and fed to shaft furnaces via conveyors.
The calcined ore from the reduction plant is transported to the melting plant (electric furnaces) through a hopper car system. Of the original three 55-mva el ectric furnaces, only one is now designed to operate (obviously at double the mv a but steady at 85 mva) and it is the success story of Falcondo. One furnace has been processing the tonnage and has produced the pounds at not much below the plant’s original design capacity. This state-of-the-art approach has dramatically cut the operating costs and improved the productivity of the plant.
The availability of the electric furnace is 95%, but the company is striving for 98%. The recovery of the process is at about 93% of the nickel contained in reduction plant feed recently averaging 1.95% or better.
The metal from the electric furnace goes to a refining station. The refined metal is cast into pigs (ingots) representing 66%-75% of the total output and the remainder (most of the scrap in a remelting furnace) becomes ferrocones. The pigs contain 34%-40% nickel, and ferrocones about 38.5% nickel, for the U.S. market (with +0.5%) and 34%-40% for the European customers. Moreover the maximum sulphur allowed is 0.1%; phosphorous, 0.02% — strict standards indeed. The other spe cification is a minimum nickel-to-cobalt ratio of 40:1, suggesting that Falcondo gives away to customers 1-1.5 million lb of cobalt a year (which is con tained in the nickel ingots and ferrocones). That’s worth about $10 million.
The ingots are bundled and trucked to the Port of Haina (near Santo Domingo) while the ferrocones are put into 20-ton containers and shipped to the same dock facilities.
The two most serious burdens of the company are the adverse changes in the price of oil and the high level of its continuing long-term debt. That debt stood a t $208.5 million(US) at the end of 1986. It has not changed much since commercial operations began at the end of 1972, when it stood at $180.9 million. The company’s debt position reached a low point of $110.5 million in 1979, the last calendar year of profitability. In the 1980-to-1986 period, losses totalled $146.4 m illion including a disastrous $55.6 million in 1982. The book value of deficits total $126.8 million to the end of 1986.
In 1985 and 1986 Falcondo repaid Falconbridge & Armco a total of $8.25 million and $5.08 million respectively. The principal and accrued interest on the adva nces by the shareholders are payable not later than Dec 15, 1991. At the end of 1986, the advanced amount due totalled $179.5 million of which $68 million is th e principal due to Falconbridge.
The loss of $2.2 million in 1986 was caused by low production in the first four months of this year — the result of a planned maintenance shutdown in January and a month-long strike by hourly paid workers in April. The period May to December produced net earnings of $7.3 million, mainly as a result of efficient operations and reduced crude oil prices. The average price paid by the company for imported crude oil was $12.39 a barrel in 1986, compared to $26.52 per barrel in 1985. The project’s sensitivity to oil prices is enormous, as the annual oil con sumption averages 2.5-3 million barrels. As a rule of thumb, each $1 change in t he price of oil means a change of 4.5 cents per lb in the cost of nickel for Falcondo. The operating costs in recent periods averaged about $1.35 per lb.
In the past three years Falcondo has consistently reported strong operating profits of about $16 million annually, yet interest payments absorbed the black in k. Nevertheless the operation continues to generate a positive cash flow. The year 1987 will be another good year in that respect.
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