Riding the wave of resurgent nickel prices,
The US$50-million, 12-tonne-per-day plant, which will test Inco’s proprietary pressure-acid-leach (PAL) technology, is 15%-held by Bureau de recherches gologiques et minires, an agency of the French government. If the partners decide to build a commercial-scale plant (a decision that is expected by the second half of 2000), construction would begin in 2001 and last three years.
The pilot plant, which employs 70 people, will also be used to train New Caledonian workers for possible commercial operations.
Such a commercial plant would incur a capital cost of about US$1.4 billion, though Inco would likely seek out a partner and develop Goro in phases. For the first phase, annual production is projected at 27,000 tonnes nickel and 2,700 tonnes cobalt; at full capacity, these rates would double.
Cash production costs are expected to be less than US$1 per lb. nickel after a cobalt credit priced at US$7 per lb.
Inco says the PAL process is superior to that of its Australian competitors in several respects: ore is treated at a higher temperature, thereby reducing the leaching time and the number of autoclaves required; a simpler proprietary solvent-extraction process is required; and the resulting nickel oxide product is preferred by refineries in Japan, South Korea and Taiwan. (Other laterite operations produce a finished product, such as electro-nickel and hydrogen-reduced nickel.) Also, the technology does not use saline water and is therefore less susceptible to corrosion.
The Goro property hosts extensive laterite deposits with resources exceeding 200 million tonnes averaging 1.6% nickel and 0.17% cobalt. Inco has already delineated a reserve of 47 million tonnes exploitable by open-pit methods.
New discovery
In other news, Inco has discovered of a high-grade zone of nickel, copper and platinum-group metals at the Totten mine, a former producer near Sudbury, Ont., that has been closed since 1970.
Six holes drilled from surface intersected high-grade mineralization in the range of 0.9-3.3% nickel, 1.6-5.4% copper and 6.3-8.7 grams per tonne platinum group metals over a true thickness of 6.3 to 35.6 metres.
The best intersection graded 3.2% nickel, 3.6% copper and 5.7 grams pgm over 16 metres true thickness.
Geophysical surveys confirm the continuity of the mineralization between the holes and indicate further extensions to the south.
Robert Horn, vice-president of exploration, says most of the mineralization occurs at or above a depth of 1,400 metres (the bottom of the existing shaft at Totten). He adds that the zone is open at depth, a geophysical anomaly extends over 300 metres south of the shaft, and a similar body exists 150 metres to the north.
Inco has drilled a single hole into this northern body with good results.
“We don’t like to report ‘one-hole wonders,'” says Horn. “But the grades are good, the platinum grades are very high, and [this] points to a geophysical anomaly sitting farther to the north still.”
By the first quarter of next year, drilling will have delineated the new deposit and a resource estimate will be calculated. The next stage of exploration, which would follow the de-watering of the shaft, might be underground drilling and drifting in the fourth quarter of 2000.
No mining plans have been announced, though, according to Inco Chairman Michael Sopko, “we could get quick access and save a fair amount of money on infrastructure.
“What the final [cost] number will be, will be determined by the shape and size of the orebody, which we hope to tie down early next year. It’s awfully, awfully attractive, especially with the value of that ore — this is real rich ore.”
This year, Inco is spending US$6.4 million on underground and surface exploration at its Ontario division.
“We’ve been looking for targets that are very high-grade and which have a low-capital requirement to put into production,” says Horn. “This is our first success, but we’ve also discovered 40 other targets that we’re going to start hitting this year and next.”
At the boardroom level, Inco is celebrating its first quarterly profit since the second quarter of 1998. The company earned US$7 million (US1 cents per share) in the third quarter, compared with a loss of US$24 million (US18 cents) in the corresponding period of 1998, despite extended summer shutdowns at both Canadian divisions and a continuing lock-out of workers at Thompson, Man.
Sales revenue between the two periods rose to US$543 million from US$369 million, mainly on the back of higher realized prices for the company’s primary nickel products, which averaged US$3.06 per lb. in the third quarter of 1999, up from US$2.17 per lb. a year ago. In comparison, the London Metal Exchange’s average cash nickel price for the third quarter of 1999 was US$2.90 per lb.
Inco’s cost-cutting program is reflected in its cash-cost figures. In the third quarter, the cash cost of nickel production, net of byproduct credits, was US$1.28 per lb., compared with US$1.40 a year ago.
“The work stoppage in Manitoba may, however, impede our progress in the area of cost reduction,” cautions Peter Jones, vice-president of operations.
During the recent quarter, Inco delivered 65,545 tonnes of nickel in all forms (compared with 60,260 tonnes in the third quarter of 1998), as well as: 22,064 tonnes copper (22,981 tonnes); 349 tonnes cobalt (464 tonnes); 80,000 oz. platinum-group metals (81,000 oz.); 8,000 oz. gold (11,000 oz.); and 155,000 oz. silver (220,000 oz.).
For the first nine months of the year, Inco posted a net loss of US$10 million (US17 cents per share) on sales revenue of US$1.5 billion, compared with a year-ago loss of US$63 million (US50 cents per share) on US$1.4 billion.
Capital expenditures during the first nine months fell to US$129 million, compared with US$307 million a year ago. The decrease is mainly due to lower spending on the nearly completed expansion of Inco’s 59%-owned Indonesian subsidiary, PT Inco.
Commenting on nickel demand, Sopko notes that stainless steel production, which accounts for two-thirds of the use of nickel, has been strong — up 7.5% from last year’s third quarter. Demand for stainless steel has been exceptionally strong in Asia, he says, with South Korea and China leading the way.
Sopko also sees good support for primary nickel in some non-stainless sectors, particularly in Japan, where the recovering semi-conductor industry is intensifying demand for nickel in non-ferrous alloys.
Meanwhile, Inco continues to participate in informal, confidential discussions with the Newfoundland government over the scope of the Voisey Bay project in Labrador.
In August, the company restarted discussions with the Labrador Inuit Association and the Innu Nation concerning an impacts-and-benefits agreement.
The company says a development proposal could be submitted to the government before the end of the year.
Should Inco get the governmental go-ahead before year-end, construction could get under way as early as June 2000, with production of concentrates beginning by late 2003.
Drilling and geophysics are being directed at the main claim block area. Core drilling during the quarter totalled 12,018 metres.
About 5 km southeast of the Ovoid section, near Ryan’s Pond, drilling at the base of a troctolite intrusion has intersected a zone averaging 1.3% nickel, 0.7% copper and 0.04% cobalt over 29.5 metres at a depth of about 1,600 metres. Further drilling will seek extensions to this new zone, which remains open in all directions.
Also, definition drilling is under way in the Eastern Deeps section, starting in the western (shallow) end of the section.
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