Falconbridge doubts nickel price justifies Raglan go-ahead

Located in northern Quebec’s remote Ungava area, the Raglan deposits host reserves of 12 million tons grading 3.11% nickel and 0.79% copper with appreciable platinum group metal values.

“The project looks great at $8 nickel,” New Quebec Raglan president T. F. Pugsley told The Northern Miner. However, few trades are actually being made at these prices with the majority of nickel sales actually being made at lower prices, he added.

Even at $4, Pugsley concedes that Raglan would be a viable mine. “At $4 the project looks interesting, but we don’t believe we’ll get $4 nickel over the next seven years.”

Construction of a mine and concentrator complex at Ungava would take three years. At a price of $4 per lb, another three years would be required for capital payback, Pugsley explained. Falconbridge and its affiliate would then be betting that nickel prices, which currently hover around $7 on the London Metals Exchange, would remain high during the six to seven year construction and payback period.

That’s a gamble both companies are not prepared to take today. Also, Pugsley notes that Falconbridge’s smelter in Norway, which would be the likely destination for Raglan nickel-copper concentrates, has no excess capacity. “Our refinery is full,” he explained.

Despite the lack of commitment to develop the large deposits, Raglan is not sitting idle. With the main claims coming open in 1991, Raglan is committed to performing a certain amount of assessmemt work to keep the ground in good standing. This year, the company is planning a $3.5-million exploration program which will include about 20,000 ft of diamond drilling. Pugsley added that this amount of work would be sufficient to keep the property in good standing for another 10 years.

At last year’s annual meeting, shareholders were told that capital costs to build a 2,000-ton-per-day mill capable of producing 33 million lb of nickel per year, was approximately $235 million.

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