CaNickel Mining (CML-T) is scaling back operations at its Bucko Lake nickel mine near Wabowden, Man. owing to “unfavourable” nickel prices, the company has announced.
The company says cutting production to 400 tonnes to 500 tonnes per day from 600 tonnes to 700 tonnes per day would shave operating costs, preserve capital and allow CaNickel to finish building a paste backfill plant and expand the mine’s tailings facility.
Management says the move could trim the company’s cash burn from $2.7 million per month to $1.7 million and encourage cash flow.
How long the mine will operate at reduced levels is uncertain, the company says.
The nickel spot price has fallen from US$13 per lb. in February 2011 to US$8.33 per lb. on Dec. 30. London Metal Exchange (LME), three-month nickel trades at US$18,195 per tonne. At its peak in February nickel was nearly US$29,500 a tonne.
Used to strengthen stainless steel products that range from kitchen sinks to aircraft-fuel tanks, nickel was the worst-performing base metal on the LME last year, as investors worried about a global economic slowdown that would curb metal demand.
News of the reduced operating levels at the Bucko Lake mine sent the company’s shares down to a 52-week low of 3.5¢.
In other news, CaNickel has signed an agreement with a Hong Kong-based company, Luckyup Investment, to boost its one-year-term debt facility to US$25 million from US$15 million at an annual interest rate of 12%.
The company plans to use part of the money to undertake a feasibility study on upgrading the mine’s mill circuit and floatation facility to 1,300 tonnes per day and start a study on optimizing mining methods. The second study will look at stoping methods, production sequences and schedules to mitigate ore contamination from hydraulically backfilled stopes, to increase productivity and reduce production costs.
CaNickel – formerly named Crowflight Minerals – anticipates that both of the studies will be completed in 2012.
The company also has nickel, copper and platinum group mineral projects in Manitoba’s Thompson nickel belt and Ontario’s Sudbury basin.
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