Voisey’s Bay production just a year away

While it’s a bit rich for Inco (N-T) to be describing its long-delayed Voisey’s Bay nickel-copper-cobalt project in Labrador as “ahead of schedule,” construction at the mine site is going so well that the commissioning of the mill and concentrater is now expected in August 2005, six months earlier than previously planned.

Situated near the Labrador coast, 350 km north of the regional centre of Happy Valley-Goose Bay, the Voisey’s Bay mine is slated to produce an average of 50,000 tonnes nickel, 38,600 tonnes copper and 2,270 tonnes cobalt per year over a mine life of at least 30 years.

“Things have come together well,” says Inco President Peter Jones. “We’ve put extra people on the engineering and left equipment on-site over the winter, which allowed us to get started on work this spring before the shipping season started.”

Miners will first exploit the open-pit reserves of the Ovoid deposit, where there are 30 million tonnes grading 2.85% nickel, 1.68% copper and 0.014% cobalt.

What’s left after that is not nearly so rich or accessible, with indicated resources in the remaining deposits standing at 54 million tonnes grading 1.53% nickel, 0.7% copper and 0.09% cobalt. The inferred resource consists of 16 million tonnes grading 1.6% nickel, 0.8% copper and 0.1% cobalt. The reserves and resources contain no byproduct platinum group metals, unlike the deposits of the Sudbury basin.

Nickel ore will be concentrated on-site to a grade of 18-19% nickel, up from the prefeasibility-study expectations of 13-14%. This improvement will increase milling expenses, owing to a longer retention time in the float system at the same grind size. However, transportation costs will be dramatically reduced since about 35-40% less product, by tonnage, will be shipped from Voisey’s.

About 82% of the copper mined at Voisey’s will be contained in a copper concentrate; the remainder will report to the nickel concentrate.

“This improved schedule reflects the prospect of making the first shipment of concentrate in November of 2005,” says Inco Chairman Scott Hand, noting that Inco will be able to ship the concentrate produced at Voisey’s Bay for a full 40 weeks each year under the terms of the agreement covering the project.

Furthermore, since three months are needed for shipping and processing in Ontario and Manitoba, Inco should see first finished nickel production from Voisey’s Bay during the first quarter of 2006.

“Remember, only half of Voisey’s Bay product represents new nickel to the market, with the balance replacing ore from higher-cost mines, such as Stobie, as well as external feed,” says Hand.

Research and development to test the hydrometallurgical processes are reportedly going well; eight campaigns have been completed and the ninth is under way.

Inco has completed the basic engineering for the demonstration plant to be built in Argentia, Nfld., and the company restarted site construction there in May.

The demonstration plant should be ready to receive its first shipment of nickel in concentrate in the fourth quarter of 2005.

“We believe our plan will result in a low operating cost, good recovery, and an environmentally acceptable process,” says Hand.

In Labrador, where about 1,200 people are currently employed on-site, work on the mine and concentrator is proceeding smoothly, with most project engineering completed. Procurement for the Phase 1 mine and concentrator was carried out in the second quarter.

Pre-stripping of the Ovoid deposit is under way, and Inco has started cladding the middle concentrator building, where the foundation is complete. Work crews have also finished the port-site excavation, and negotiations for the freight and concentration-handling contracts are nearly complete.

Spending on the project this year should total about US$400 million, and the company is on budget, in Canadian dollars, for a project that is budgeted at US$888 million (using a US75 Canadian dollar).

“Voisey’s Bay has had its challenges,” says Hand, “but it’s shaping up as a great success story.”

For the second quarter, Inco posted a loss of US$14 million (US9 per diluted share) on revenue of US$992 million, compared with a profit of US$64 million (US34) on revenue of US$599 million in the corresponding period of 2003.

The second-quarter loss stems from a non-cash asset impairment charge of US$191 million relating to the Goro nickel-laterite project in New Caledonia. The charge related to a change in the processing plan toward a more-efficient direct, rather than indirect, heating of the ore feed, which made obsolete past direct-heating work.

In the coming weeks, Inco expects to have reached a new capital cost estimate for Goro, and to have arrived at a viable mine construction and operating plan. If, as expected, the company decides to restart the Goro project, production could be achieved in mid-2007.

“Make no mistake about it, we’re confident the Goro project will succeed,” says Hand. “We enjoy a strong financial position . . . and have the firepower necessary to implement our plan to grow.”

He notes that every US10 rise in the nickel price over a year raises cash for Inco by US$43 million, and the company’s cash balance at the end of June 2004 was US$774 million, up from US$414 million just six months earlier.

Says Peter Goudie, executive vice-president of marketing: “Inco is doing all it can to ensure that as much nickel supply as possible can reach the market. We are pushing our operations to maximize production. We’re doing all this because it’s right for our shareholders, our customers, and a world that needs nickel. Inco intends to remain nickel’s champion.”