[Sudbury mine] Closure part of global trend: Analyst – by Harold Carmichael (Sudbury Star – October 19, 2012)

The Sudbury Star is the City of Greater Sudbury’s daily newspaper.

Nickel analyst Stefan Ioannu of Haywood Securities in Toronto is not surprised by Vale’s decision Thursday to close the 100- year-old Frood Mine in Sudbury.

” You have deposits and greater depths right now,” he said. “The deeper you go, the more expensive it is to get to stuff. Maybe ( Vale) can squeeze a little more out if it sells at $10 (a pound), a little less at $7.”

Ioannu said the Frood decision is one of many being made across the globe right now by the mining industry. “One of the big things we have been seeing coming out of the majors is a focus,” he said. “They will be shutting some of their big projects and focusing on regular operations to cut costs. It’s an interesting shift.

“It’s very difficult for the big companies to justify developing things with the (nickel) price now.” Ioannu said while he sees nickel prices rising to US$10 a pound, they could bottom out at $6. The reason they will rebound, said the mining analyst, is that high-grade nickel pig iron deposits in Indonesia — which could be turned on and off quickly and flood the nickel markets — are mostly gone and only low grade ones remain.

“The cost of energy in China (the big nickel pig iron producer) is also going up,” said Ioannu.

Nickel analyst Terry Ortslan of TSO & Associates in Montreal also said he was not surprised by the Frood announcement.

“I think it’s an adjustment process, a mine process,” he said. “I think with Vale operations, Sudbury probably has more confidence in what is happening, (but) Manitoba is always a question now.”

Greater Sudbury native Stan Sudol, who operates the Republic of Mining website on the Internet, said the Frood decision is not being done in isolation.

“We should be careful about over reacting at this point in time, since we do not have the full picture and global financial issues are in a state of flux,” he said. “It is always wise in uncertain economic times to reevaluate efficiencies and productivities within any company.

“Without a doubt, the slowdown in China is having a negative impact on metal demand around the world. Vale has also recently suspended some of their iron ore mines in Brazil. Sudbury is not immune to these global uncertain conditions. Due to the age of the mines being closed, the cost of production was obviously a major factor.

“However, in the long term, a growing middle class in the developing world will ensure that the minerals we economically dig out of the ground in the Sudbury Basin will be needed. And we should remember that throughout the booming 1950s and 1960s, there were some short-term recessions that caused similar restructuring in the local industry.”

Mayor Marianne Matichuk said in a statement Thursday it was “unfortunate” Vale is closing Frood, but “reassuring” the 85 employees involved will be relocated.

“Vale has made it clear in recent weeks that the metals market is hampered by weak prices,” she said. “The company has always been up front that it needs to improve efficiencies and control costs.”

For the original version of this article, please go to the Sudbury Star website: http://www.thesudburystar.com/2012/10/18/metals-market-will-rebound-analysts

 

 

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