6th January 2014

[Vale, Glencore Sudbury] Merger wouldn’t result in plant closures, mine analysts say – by Harold Carmichael (Sudbury Star – January 6, 2014)

posted in Glencore-Xstrata PLC, Northern Ontario/Canada Regional Media, Stan Sudol Columns/Media References and Appearances, Vale |

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

If ongoing Vale and Glencore Xstrata discussions produce an agreement in 2014 on how to mine nickel and copper in the Greater Sudbury area more cost-effectively, there might be some short-term job cuts, but no big plant closures, says a man who runs a website devoted to mining.

“Absolutely not,” said former Greater Sudbury resident Stan Sudol, who now works in Toronto and operates The Republic of Mining website. “The two operations – the Clarabelle Mill and the Strathcona Mill – process different types of ore. On the north slope (of the Sudbury Basin), the ore is heavy in copper and PGMs (platinum-group metals). The Clarabelle Mill, meanwhile, deals with ore from the south side which is more nickel heavy. I would be very surprised if either of the mills gets closed.”

Sudol added that the Falconbridge Smelter, which he understands is operating under capacity, is processing ore from Australia and the Raglan project in Quebec, in addition to local ore. “The operation is a part of a global industry,” he noted.

On. Dec. 18, Reuters reported Vale’s chief executive officer Murilo Ferreira said he expects Vale’s “consortium” with Glencore Xsrata in Greater Sudbury nickel projects to be defined by the first quarter of 2014 and for the venture to operate as a single unit.

In November, Vale confirmed it was in talks with Glencore Xstata about potential mining co-operation between the mining companies’ nickel operations to cut costs. Vale said it wasn’t planning a corporate joint venture in Greater Sudbury, but was looking at other options to join forces in mining, milling and smelting to save cash.

While the rumoured savings are in the hundreds of millions of dollars, back in 2006 when Falconbridge and Inco were looking to merge, the estimated annual savings of such a merger were projected to be $550 million.

Nickel analyst Terry Ortslan of TSO & Associates in Montreal, said combining the two sets of mining operations in the Sudbury Basin is a much bigger undertaking than people think.

“There’s different flow sheets, the flow of materials there are great differences,” he explained. “There’s technological differences … I think there are things to be done. There is no question things have to be done. But cut, cut, cut? They should be looking at doing more to be more efficient. There are still good ore deposits out there to develop. Merge not to cut, but to expand.”

Ortslan said there is now instability occurring with Indonesian nickel sources, and major world nickel consumer China, which has been relying on nickel pig iron to meet its nickel needs, having to look at alternate offshore nickel sources. Those factors are among the reasons nickel on a big price rebound about one year from now, he predicted.

“I think the rise of the nickel pig iron is coming to an end,” said the nickel analyst. “I see regression.”

Ortslan doesn’t see a mill or smelter closure in Greater Sudbury’s future if the merger talks produce an agreement, as there would have to be a resulting major shift in how ore gets processed.

“It’s very complicated,” he said. “It’s massive.”

On Dec. 20, nickel was selling for $6.50/pound U.S. after falling close to the $6/pound mark in early December. But the bad news is that the volume of nickel in London Metal Exchange (LME) warehouses right now is massive – 255,744 tonnes as of Dec. 19, for example – selling a new record high almost daily.

In contrast, the average price of nickel sold in 2012 was $7.95/pound U.S. In 2011, it was $10.36/pound U.S.

In the second week of December, nickel prices reached a five-week high amid concern about a ban on ore exports scheduled to take effect in January in Indonesia, the world’s biggest producer of the metal from mines.

Global nickel demand, meanwhile, is expected to climb by 4.5% in 2014, but supply is expected to hit fresh records with new projects coming on stream and existing operations ramping up output, an industry group predicted in mid-December.

Sudol agrees with Ortslan on the untapped potential of the Sudbury Basin. He said that while much of the “low-hanging fruit” has been tapped, the area is still a great place to have a mining operation and explore.

“One of the best places in the world to find new nickel and PGM deposits is Sudbury,” he said. “(And) you have all the necessary infrastructure in place.”

For the original version of this article, click here: http://www.thesudburystar.com/2014/01/05/merger-wouldnt-result-in-plant-closures-mine-analysts-say

 

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