Inco develops a taste for Aussie ore

Already sourcing nickel in concentrate from LionOre Mining‘s (LIM-T) Emily Ann mine in Western Australia, Inco (N-T) has agreed to another life-of-mine off-take agreement on the junior’s nearby Maggie Hays mine when it begins operation in 2004.

Concentrate from the two mines will continue to be processed at Inco’s operations in Thompson, Man.

The Maggie Hays deposit is situated 3 km south of the smaller Emily Ann nickel mine. A recently completed feasibility study pegged Maggie Hay’s indicated resources at 633,000 tonnes grading 3.55% nickel.

LionOre expects incremental production from a high-grade section at the upper part of the Main zone (indicated resource: 633,000 tonnes grading 3.55% nickel) to begin in the second half of 2003. A lower massive sulphide zone (probable reserve: 475,000 tonnes at 3.55%) would begin producing in the third quarter of 2004 (T.N.M. Feb 3-9, 2003).

Combined with the Emily Ann mine, nickel production from the Lake Johnston region is expected to climb to 7,000-8,000 tonnes annually from 5,400 tonnes in 2002.

Also as part of the pair’s “strategic alliance,” Inco will subscribe to 4 million LionOre shares at $5.75 apiece. LionOre will use the proceeds to a repay a $22.1 million loan from Inco.

Inco will also foot the bill for a four-year, A$15-million exploration campaign on LionOre’s wholly owned Lake Johnston tenements (which host LionOre’s Emily Ann and Maggie Hays nickel sulphide deposits) and the nearby 90%-owned Southern Cross tenements. In return, Inco would gain a 40% stake in any major nickel discoveries.

The agreement also calls for collaboration on research and development of processing technologies for the recovery of base metals from sulphide ores, including LionOre’s proprietary Activox hydrometallurgical process.

A definitive agreement is expected with the next few weeks.