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nickel tightness to continue

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    - Newsletter -

    PDAC '07 – Nickel, zinc tightness to continue: Xstrata
    Tuesday, 6 March 2007
    Paul Garvey

    A LACK of discoveries and major delays in project commissionings are set to underpin high nickel and zinc prices in the near term, according to senior representatives of Swiss-based mining giant Xstrata.

    Speaking at the PDAC convention in Toronto on Sunday, Santo Ranieri of Xstrata Nickel said the weak nickel price of the 1990s, the expected impact of the much-hyped Voisey's Bay deposit, and the undelivered revolution promised by the Western Australian nickel laterite miners had seen nickel exploration sliced by 44% during the previous decade.

    While nickel exploration expenditure has since rebounded by 200%, Ranieri said no new major discoveries had surfaced. Meanwhile, the crop of advanced major nickel plays had experienced major cost blow-outs, raising the barrier of entry costs to extreme levels.

    Between CVRD Inco's Goro project in New Caledonia, BHP Billiton's Ravensthorpe mine in Western Australia, La Societe Miniere du Sud Pacifique and Xstrata's Koniambo deposit in New Caledonia, and Dynatec's Ambatovy deposit in Madagascar, the combined initial capital cost forecast of $4.7 billion has blown out to current estimations of a total $9.9 billion.

    Contributing to the increasing cost environment is a shortage of skilled labour, illustrated by the increase in the average age of miners in Australia and Canada to 47 years and 50 years, respectively, said Ranieri.

    He said it would become increasingly difficult to bring larger nickel projects onstream, leaving those sorts of developments to larger companies.

    "These huge upfront expenses represent a huge barrier to entry, and are beyond the reach of all but the biggest mining companies," Ranieri said.

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