FNX reserves up along with earnings (April 16, 2007)

Year-end reserve estimates at FNX Mining (FNX-T, FNXMF-O) show the company replaced its reserves at the operating McCreedy West nickel mine near Sudbury, Ont., and it has also published its first reserve figure for the nearby Levack mine.

McCreedy has 1.1 million tonnes grading 0.2% copper and 1.57% nickel in its Contact zone, and another 800,000 tonnes with 1.43% copper, 0.28% nickel, 2.4 grams platinum, 1.7 grams palladium, and 0.7 gram gold per tonne in the Footwall zone of the deposit. The Footwall reserve is part of a resource of 2.3 million tonnes averaging 1.33% copper, 0.26% nickel, 2.4 grams platinum, 2.1 grams palladium, and 0.7 gram gold per tonne; in addition, 550,000 tonnes grading 0.92% copper, 0.27% nickel, 3.4 grams platinum, 2.4 grams palladium and 0.7 gram gold is inferred.

The new reserves effectively replace all of last year’s mining from McCreedy, which shipped 625,000 tonnes of ore to the Sudbury operations of Inco, now part of Companhia Vale do Rio Doce (rio-n), in 2006 to produce 3,700 tonnes nickel, 4,300 tonnes copper, and 30,000 oz. combined precious metals (platinum, palladium and gold). McCreedy’s costs were $109 per tonne in 2006, translating to a cash production cost of US$1,700 per tonne (US77 per lb.) of nickel, after byproduct credits for copper and precious metals.

At Levack, where FNX began underground work in December, there is a reserve of 1.3 million tonnes grading 0.57% copper and 1.54% nickel, part of a resource of 4.3 million tonnes averaging 1.01% copper and 2.04% nickel. Another 660,000 tonnes falls into the inferred category, with average grades of 0.88% copper and 1.91% nickel.

Levack produced 7,000 tonnes of ore in 2006, about half of which was shipped by year-end (the rest was shipped in January). Commercial production is expected shortly, and in the meantime revenue is being credited against development costs. FNX expects to be hoisting 1,400 tonnes a day in the latter half of the year.

The resource and reserve figures do not include the Levack Main Depths deposit, downdip from the known Levack orebody, whose discovery FNX announced in February. A 20-hole drill program intersected copper-nickel mineralization in every hole, over core lengths of 1.5 to 19 metres. Nickel grades in the initial drilling mainly ranged from 1% to 3%, with local higher-grade zones, while copper grades were more variable. Precious metal credits were mainly around 1 gram per tonne.

FNX expects to put together a resource estimate for the Main Depths this year.

The deposit is in the granite- breccia footwall of the Sudbury intrusion, downdip from the main Levack orebody, previously mined by Inco, but apparently plunging slightly eastward. It is about 200 metres east along strike from the Levack No. 7 orebody, and FNX geologists have not ruled out the possibility that No. 7 and the Main Depths are continuous.

Electromagnetic surveys down the drill holes have returned results that are consistent with a continuous conductive body about 400 metres horizontally and 250 metres along the plane of dip.

At the Podolsky development project, FNX is to complete two crosscuts and some ventilation raises, and should do some preproduction in the last quarter of the year. The company expects to have a production decision late in the year.

Indicated resources at Podolsky stand at 2.9 million tonnes grading 3.37% copper, 0.3% nickel, 1.7 grams platinum, 1.4 grams palladium, and 0.7 gram gold per tonne. A 4.4-million-tonne inferred resource grades 1.16% copper, 0.15% nickel, 0.3 gram platinum, 0.7 gram palladium, and 0.3 gram gold per tonne.

The project, on the northeast corner of the Sudbury structure near the closed Whistle mine, has a shaft to 811 metres depth, and the two crosscuts are at 747 and 533 metres.

FNX earned $68.7 million (82 per share) on revenues of $170 million in 2006, up from $4.6 million earned on $84.6 million turnover in 2005. The metal markets were as kind to FNX as they were to others — the company realized US$26,800 per tonne (US$12.16 per lb.) for nickel and US$7,010 per tonne (US$3.18 per lb.) for copper during the year.

The company had $115 million in cash plus $53.3 million in receivables and inventory at year-end, with $36.8 million in current liabilities. Long-term liabilities, almost all taxes, amounted to $168 million and the company had a book value of $830 million.