AMERICAS — New deposits fundamental to Falconbridge growth

Armed with a pile of cash from one of Canada’s largest corporate stock offerings, Falconbridge (TSE) can now proceed with two major base metal deposits which should fuel the company’s growth well into the next century.

Some of the cash from the $1.3-billion equity issue is expected to fund development of the 100%-owned Raglan nickel property in Quebec and the one-third-owned Collahuasi copper project in Chile.

Raglan, which lies on the Ungava Peninsula of northern Quebec, is one of the largest undeveloped nickel sulphide deposits in the world. A feasibility study was completed in late 1993 and a production decision could be made by as early as 1995.

Widespread nickel-copper mineralization occurs in an east-west-striking belt, over a distance of at least 60 km. At present, reserves totaling 18.1 million tonnes grading 3.13% nickel and 0.88% copper have been established at six separate sites.

Initial production is planned from several open pits and from the Katinniq deposit. It is estimated that annual output will be 20,800 tonnes of nickel concentrate, 5,200 tonnes of copper concentrate and 330 tonnes of cobalt, plus some platinum group metals.

Falconbridge expects to be able to ship concentrates from the port of Deception Bay for at least eight months of the year.

Since 1989, the company has spent $52 million developing the Raglan project, and another $3.3 million is budgeted for 1994. The feasibility study estimates that the additional capital costs of entering production will be $400 million. Cash operating costs will be less than US$2 per lb. nickel. Current studies are aimed at minimizing capital costs and determining the optimum production rate and startup date.

Meanwhile, with a preliminary reserve of about 1.7 billion tonnes, Collahuasi is potentially the third-largest copper mine in the world.

Situated in northern Chile about 170 km southeast of the port city of Iquique, the property hosts two deposits, Rosario and Ujina, which are 10 km apart. The former contains 1 billion tonnes grading 1% copper, whereas the latter hosts 150 million tonnes of secondary-enriched chalcocite ore grading 1.7% and is underlain by 600 million tonnes of chalcopyrite ore grading 0.8%. A prefeasibility study in 1993 determined that the project would yield an attractive return on a capital investment of about US$1 billion, assuming a base copper price of US90 cents per lb.

A definitive study, now in progress, is scheduled to be completed by March, 1995. It envisages annual production of 300,000 tonnes of copper in sulphide concentrates using open-pit mining and conventional flotation. Initial production from the Ujina secondary enrichment zone is contemplated at 60,000 tonnes per day. Preproduction stripping of the Ujina orebody and plant construction are expected to begin in 1996. The study will also evaluate the production of up to 50,000 tonnes per year of copper cathode from the oxide reserves by leaching and solvent extraction-electrowinning. Development expenditures since 1992 have totaled $19.9 million and an additional $14.5 million will be spent in 1994. Initial production is planned for late 1998 or early 1999.

Collahuasi is owned equally by Falconbridge, Shell and Minorco, but Shell intends to sell its one-third interest by September.

In addition to these two new deposits, Falconbridge mines and processes nickel ores at its Falcondo division in the Dominican Republic and at its Sudbury division in Ontario. It also produces copper and zinc, at its Kidd Creek division near Timmins, Ont.

In the Dominican Republic, Falconbridge Dominicana (better known as Falcondo) has been mining and processing nickel laterite ore since 1971. Over the past 22 years, about 46.5 million tonnes of ore grading 1.63% nickel has been produced.

The ore occurs in surface deposits situated within 40 km of the processing facilities. Proven reserves stand at 34 million tonnes averaging 1.73% nickel, using a 1.4% nickel cutoff grade. In addition to the proven reserves, five other laterite deposits have been identified. In total, these contain estimated reserves of 20.2 million tonnes grading 1.73% nickel. Last year, the operation mined 2.6 million tonnes grading 1.41% nickel at an average cash cost of less than US$1.80 per lb.

Falconbridge owns 85.3% of Falcondo. Of the balance, the Dominican government holds 10%, Redstone Resources (TSE) 4.1%, and various individuals the remainder.

In Sudbury, Falconbridge has been mining nickel-copper ores since 1929. The division operates five underground nickel-copper mines: Craig, Fraser, Lindsley, Onaping and Strathcona Deep Copper. Over the past 65 years, it has processed about 115 million tonnes of ore with an average grade of 1.43% nickel and 0.92% copper.

In 1993, the Sudbury operations mined more than 2.5 million tonnes grading 1.79% nickel and 1.96% copper. The cash cost per lb. of nickel produced decreased by 42% to less than US$1.80 per lb.

To the end of 1993, total proven and probable reserves at the Sudbury division stood at 26.5 million tonnes grading 1.75% nickel and 1.61% copper. An additional 13.9 million tonnes grading 1.34% nickel and 0.9% copper are listed as possible.

At current operating rates, these reserves are sufficient for 15 years of production.

On the exploration front, diamond drilling at the Nickel Rim property near Falconbridge, Ont., has outlined a significant zone of nickel-copper mineralization at a depth of 2,500-2,700 metres. Based on nine drill intersections, the zone contains an undiluted mineral inventory of 520,000 tonnes with an average grade of 4.13% nickel, 25.53% copper, and 9.8 grams platinum and 8.4 grams palladium per tonne. Additional drilling will be carried out this year.

In the Sudbury Basin, the company is carrying out grassroots mapping, geophysical surveys and diamond drilling. Exploration was recently carried out in the area downdip of the Craig-Onaping mines, in the Joe Lake area (8 km northwest of Capreol, Ont.) and on the Trill-Drury project (20 km northwest of Lockerby Mine).

At the Kidd Creek division, ore production in 1993 was 3.5 million tonnes grading 3.28% copper, 3.78% zinc and 49 grams silver per tonne. Production last year was slightly lower than in previous years because mining progressed to deeper levels of the orebody.

Drilling at the Kidd Creek mine has uncovered additional copper-zinc ore below the 5,600-ft. level and extending to at least 7,300 ft., which should help extend the life of the mine past the year 2004, when current reserves are expected to be depleted.

In addition, limited drilling to the 7,800-ft. level has assayed massive sulphide mineralization grading up to 0.83% copper and 12.80% zinc over 54.3 metres, with the deposit still open at depth.

Exploration near Timmins has also turned up some promising results. Drilling in the Kamiskotia area, 15 km southwest of the Kidd Creek mine, has outlined three significant zones of alteration containing base metal mineralization. The best intersection from this area, in 1993, returned 12.6% zinc over 2.45 metres.

Farther afield, Falconbridge is exploring for new nickel deposits in the Ivory Coast, Botswana, Zimbabwe and Greenland.

At Biankouma, on the eastern border of the Ivory Coast, the major is involved in a joint venture with Trillion Resources (TSE) and state-owned SODEMI. Laterite nickel deposits have been known in this area since 1973. Falconbridge Nickel drilled 210 holes on one large deposit between 1979 and 1982 but let the property lapse during a period of depressed market conditions. Trillion acquired the permit in 1989 and completed a prefeasibility study in 1991. Falconbridge subsequently reviewed the study and returned to the project.

The company is conducting a 100-hole confirmation drilling program which will be completed shortly. The objective is to prove up a threshold reserve of 50,000,000 tonnes of 2% nickel. This would represent 20 years of reserves at a mining rate of 65 million lb. nickel per year.

The search for new nickel deposits is also continuing in Botswana and Zimbabwe.

In Greenland, Falconbridge is exploring for nickel in a geological setting that bears some similarities to Russia’s Norilsk area.