First Nickel slashes jobs at Lockerby mine

First Nickel (TSX: FNI; US-OTC: FNKLF) is cutting 109 jobs at its Lockerby nickel-copper mine in Ontario’s Sudbury basin, as part of a restructuring plan to lower costs, resume exploration and extend the mine’s life. 

The plan follows a 2014 review that management and recently appointed vice-president for Sudbury operations Vern Baker initiated to see if they could resume development at the Lockerby underground mine amid low metal prices. 

Baker, the former president of Duluth Metals (TSX: DM; US-OTC: DULMF), is experienced in “leading effective change in underground mines,” First Nickel says.

A 2012 technical report envisioned mining from Lockerby’s 6,500-foot (1,981-metre) level to its 7,000-foot (2,134-metre) level. But in response to weak nickel and copper prices, the firm modified the mine plan and stopped developing below the 6,800 level in late 2013. 

This change meant ore from the mine would run out by late 2015, or sooner than expected. As a result, the junior took a $23.4-million non-cash impairment charge in the third quarter of 2013. 

In December 2014, the review found the company could resume ramp development while keeping production levels, if it lowered labour costs. This led to the dismissal of 49 First Nickel employees and 60 contractors, for an overall 45% workforce reduction. 

First Nickel intends to keep 115 employees at the mine. It is also trimming general costs at its Toronto head office. 

“It has been a difficult process pulling this together,” Sean Samson, the company’s head of corporate development, says of the restructuring plan. “And it is a difficult message in terms of the number of people that are leaving. But hopefully this now breathes life into Lockerby, and we are positioned much better to extend the mine life.”

The expected changes could help First Nickel produce metal profitably and resume development to reach the 7,100 level by mid-2016, as well as restart exploration, Samson says.

The firm has planned 6,300 metres of underground exploration drilling in 2015 and 7,200 metres in 2016, to boost resources and reserves and add to the mine’s life.

While the mine plan is largely unchanged from the 2012 technical report, the company will release a new technical report on Lockerby by mid-year. 

It expects Lockerby will have produced 14 million contained lb. nickel and 7 million contained lb. copper in 2014. It will reveal its 2014 year-end numbers and the production and cost guidance for 2015 shortly.

Samson says the company’s cash position is in “OK” shape, and that it is in discussions with its two main shareholders — Resource Capital Funds and West Face, which own most of the firm — about refinancing or extending the debt facilities that mature in March 2015. 

First Nickel closed Jan. 13, a day after the restructuring news, down 33% at 1¢, a 52-week low. It reached an annual high of 5.5¢ last May.