Several nickel projects alive despite price decline

It was nearly a year ago this month, for example, when Hudson Bay Mining and Smelting (TSE) and partner Outokumpu officially opened a new nickel mine at Namew Lake in northern Manitoba. That $70-million mine was the first new underground nickel mine to open in Canada in nearly a decade.

Despite getting off to a rocky start, the Namew Lake mine is currently reported to be producing at full capacity. The mine went into production with proven and probable reserves of 2.82 million tons grading 2.44% nickel and 0.90% copper.

The record 1988 nickel price of more than $10(US) per lb left a legacy of new exploration ventures for that metal, too.

It led certain companies to re- examine just about every previously known nickel deposit in the country. More recently, however, base metal analysts have been predicting the price of nickel will ease to about $4(US) per lb over the next year, still well above the depressed $2-level experienced throughout most of the early 1980s.

Some of the nickel deposits re-examined during the 1988-89 base metal price boom were in the remotest of locations, such as northern Quebec’s Ungava region and the Yukon Territory. Another junior exploration venture created a frenzied flurry of activity in a previously untested area north of Quebec’s Lac St. Jean area.

When the price of nickel soared, Falconbridge-controlled New Quebec Raglan Mines (TSE) took another look at its Ungava deposits, which host diluted proven and probable reserves of nearly 11 million tons averaging 3.11% nickel and 0.79% copper. The company concluded that the area is so far away from infrastructure that the deposits are rendered essentially uneconomic at a nickel price of less than $4 per lb. The company said the price of nickel would have to remain above $4 for at least six years to make mining the Raglan deposits economic.

But, even as nickel prices ease, Vancouver-based All-North Resources (VSE) still remains bullish on the prospect of exploiting its Wellgreen deposit in the Yukon. The company is undaunted by past failures at making a mine out of the project. Hudson Bay Mining & Smelting is said to have lost $20 million on the property in the early 1970s when it ran a brief underground operation exploiting high grade ore.

All-North is reported to be seeking a partner for the completion of a $5-million feasibility study on the Wellgreen deposit. The property hosts some 55 million tons averaging 0.35% nickel and 0.35% copper along with platinum and palladium values. The majority of the reserves are accessible by open pit. Chevron Minerals has a 25% interest in the project.

Dwarfed by other big nickel projects across the country, Toronto- based junior McNickel Inc. (COATS) took a gamble this summer on a new copper-nickel prospect in the Lac St. Jean of Quebec. A multi- million dollar drilling campaign is under way, but the project is still a long way from having an established reserve figure. Grades from recent drilling have averaged around 0.27% nickel and 0.15% copper.

Elsewhere in Quebec, Dumont Nickel (ME) continues to ponder the potential of its Launay Twp., nickel-platinum property which hosts indicated reserves of 400 million tons averaging 0.328% nickel in a potential open pit situation. The company recently entered into a share exchange transaction with Sabina Resources (VSE) and Toronto-based Redaurum Red Lake Mines (TSE).

Over the past 12 months, there has been a steady stream of nickel projects making headlines, and investors have continued to show keen interest in many of them. The recently concluded takeover battle between Amax Inc. (NYSE) and Noranda Inc. (TSE) for control of Falconbridge Ltd. (TSE) focused even more attention on the white metal, whose main use is in the manufacture of stainless steel.

Falconbridge’s Lindsley project near Sudbury, Ont., is reported to host geological reserves estimated at around 7.7 million tons grading 1.6% nickel and 1.5% copper with significant platinum group metals. A $44-million underground exploration program is under way, making it one of the more significant nickel projects in the country at present.

Another Sudbury nickel miner, Inco Ltd. (TSE) reopened its Shebandowan nickel-copper mine earlier this year. That deposit hosts reserves of some 3.3 million tons grading 2.2% nickel and 1% copper, with concentrate being shipped to Inco’s smelter by truck. The company also opened its Whistle mine at Sudbury this year.

On the junior front, Timmins Nickel (TSE), opened the small Redstone nickel mine, which hosts reserves of 453,000 tons averaging 2.9% nickel, in May. The company has a 51% interest in the mine along with partner BHP-Utah Mines. Timmins Nickel recently picked up three more nickel properties with small reserves and exploration potential near its producing mine.

In northern Manitoba’s nickel belt, Black Hawk Mining (TSE) is drilling its 100%-owned Minago project, where a small deposit hosting geological reserves of 2.2 million tons grading 1.64% nickel is reported. The mineralization also contains minor amounts of copper and precious metals, according to Black Hawk. A drilling program to further define reserves is expected to reach completion later this year.

Two-thirds of all nickel currently mined in Canada comes from Ontario’s Sudbury camp, with the remaining third from northern Manitoba. As the world’s leading producer of nickel, Canada accounts for about 24% of total world production, and last year churned out $3.3 billion worth of the white metal.

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