Xstrata reserves $200M for Raglan exploration

Xstrata Nickel, subsidiary of Switzerland-based Xstrata (XSRAF-O, Xta-L), wants to nearly double output at its Raglan nickel mine, in Nunavik, Que.

Xstrata plans to increase mine production to 2 million tonnes of ore per year from the current 1.1 million tonnes. The company hopes to reach 1.3 million tonnes by the end of 2008, but won’t begin to ramp up production further until 2011.

After the expansion, Raglan will be one of the world’s largest nickel mines, producing around 50,000 tonnes of contained nickel in concentrate annually.

In the meantime, the company will spend about $200 million on exploration so it can meet the new production target.

Xstrata recently added 2 million tonnes of inferred resources grading 3% nickel in Zone 5-8, about 4 km east of the Katinniq zone. The total inferred resource is 10 million tonnes grading 3.2% nickel, 0.8% copper, 0.08% cobalt, 0.9 gram platinum per tonne and 2.1 grams palladium.

Drill results at Zone 5-8 included a 63-metre intersection grading 4.4% nickel and 1.6% copper. Zone 5-8 has replaced Katinniq as the largest ore zone.

Opened in 1997, the Raglan mine has been run by Xstrata Nickel since August 2006, when it acquired Falconbridge. By the end of 2007, Xstrata Nickel will have spent $125 million, including $104 million to refurbish the Deception Bay wharf installations and expand the permanent accommodation facilities.

Dominique Dionne, Xstrata Nickel spokesperson, says the wharf was in bad shape and needed to be completely rebuilt. The company is working under time and weather constraints as any marine work must be completed by October, before everything freezes.

Dionne says some of the accommodations were built as temporary residences and some of the 500-plus employees must share rooms.

Worldwide, Xstrata’s profits more than doubled to US$3 billion over the first half of the year. The company also made an offer on Aug. 7 to buy Eland Platinum Holdings of South Africa (ELNPF-O, ELD-J), for $1.1 billion.