Remote high-grade nickel deposit gets second look

The boom in nickel prices will probably have little effect on development plans for the nickel deposits controlled by New Quebec Raglan Mines, President T. F. Pugsley tells The Northern Miner. Located in northern Quebec’s remote Ungava area, the Raglan deposits represent some of the finest high grade undeveloped nickel reserves in the world. Reserves calculated by Falconbridge following the 1981 exploration effort, total 12 million tons grading 3.11% nickel and 0.79% copper with appreciable platinum and palladium values. Reserves are classified as diluted proven and probable. Although Raglan, which is controlled 73.8% by Falconbridge Ltd., plans additional exploration work this year, there are no plans for bringing these large reserves to production, Pugsley says.

Raglan shares have traded to a new high of $3.25 primarily due to the strength in nickel prices, not, according to Pugsley, because of any new development plans by Falconbridge. Nickel, which sold for a low of $1.59 per lb in December, 1986, reached a 7-year high of more than $4(US) per lb this month. At current commodity prices, the Raglan ore has a gross value of more than $360 per ton. Also, exploration has only delineated ore to the 1,000-ft level. The deposits remain wide open below this depth which suggests that substantial potential remains for increasing tonnage.

During the early 1980s Falconbridge staff completed a detailed review of the economics and technical parameters required for bringing the property into production. At that time, problems with a short shipping season and the lack of hydro power were cited as two major constraints to development.

“Technologically, we can ship all year round,” Pugsley explained. “But we need a dedicated vessel and the legal wherewithal to do it.” Pugsley noted that the area is governed by very strict Arctic pollution restrictions. Falconbridge is also looking into the feasibility of building a small scale hydro plant capable of generating 10 megawatts of power. “There are rivers and catchment areas near the mine which are suitable” for supporting such a hydro plant, Pugsley said.

So what’s holding up development of the deposits, one wonders. Commodity prices. More specifically, just how long will such high prices remain in order to justify the high capital costs of building the Raglan mine.

“This project is market driven,” Pugsley explained, noting that technical concerns can be adequately addressed. “We have to be convinced that the high prices will be there,” when the mine goes into production. Capital costs are estimated at approximately $150 million.

The Raglan officer notes that mine construction could take three years with another five years required to pay back the capital investment. And as most industry observers will admit, no one is forecasting nickel prices eight years into the future.

The risk and the dilemma facing management are real. At $4 nickel, Raglan would make many heroes at Falconbridge. At less than $2 per lb, a big nickel mine in Ungava would be a terrible mistake.