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MONTREAL — Resource companies keep an eagle eye on the economic cycle and Royal Nickel Corp. believes its $1.2 billion U.S. Dumont nickel mine in northwestern Quebec will start up in 2016 as metal prices swing higher.
Base metals, including nickel — the key ingredient in stainless steel — mirror the economic cycle, with their price charts giving early warning of bad news to come.
This year they’ve been in the dumps, with nickel among the most volatile. Analysts blame overcapacity stemming from slower Chinese growth, the European debt crisis and North America’s tepid recovery from the 2008-09 recession.
But Royal, led by a team of former Inco (now owned by Brazil’s Vale SA) executives, has begun negotiating partnerships, offtake agreements and debt and equity financing for its Dumont open-pit nickel mine and mill near Amos, in the Abitibi region. It could rival Vale’s big Voisey’s Bay (60,000 tonnes a year) mine in Labrador when it hits full stride in 2020.
“We’ve been planning this for more than three years and we see a low-cost operation providing more than 500 permanent jobs, a mine life of at least 33 years and able to survive any future global economic cycles,” Tyler Mitchelson, Royal’s CEO, said in an interview.
“Nickel peaked at $22 U.S. a pound in the overheated commodity markets of 2007-08 and hit a low of $4.85 U.S. in the recession,” he said.
“It’s been up and down since, but Dumont could deliver a sound return at $9 U.S. a pound or around nickel’s average long-term price level.”
China is the biggest nickel importer and 7 per cent annual growth, along with strong demand from some other Asian countries, will rapidly absorb the overcapacity, he added. “After all the latest projects are on stream, there’s very little more in the pipeline.”
This week, Mitchelson’s team will hold community meetings to explain the project in full detail and the lengthy permitting process now underway. They will also cover operating, environmental and social issues.
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