CaNickel Mining (CML-T) is scaling back operations at its Bucko Lake mine near Wabowden in Manitoba due to “unfavourable” nickel prices, the company has announced.
The company said cutting ore production to 400-500 tonnes per day from its current 600-700 tonnes per day would shave operating costs, preserve capital and allow CaNickel to complete the construction of a paste backfill plant and expand the mine’s tailings facility.
Management said the move would trim the company’s cash burn from $2.7 million per month to about $1.7 million and allow the mine to generate positive cash flow.
How long the mine will operate at reduced levels is uncertain, the company said.
The nickel spot price has fallen from about US$13 per lb. in February 2011 to about US$8.33 per lb. on Dec. 30. LME three-month nickel currently trades at about US$18,195 per tonne. At its peak in February nickel was nearly US$29,500 a tonne.
Nickel, used to strengthen stainless steel in products from kitchen sinks to aircraft-fuel tanks, has been the worst-performing base metal on the London Metal Exchange this year as investors worry about a global economic slowdown that will curb metal demand.
News of the reduced operating levels at the Bucko Lake mine sent the company’s shares down to a 52-week low of 3.5¢ at presstime in Toronto.
In other news, CaNickel has signed an agreement with a Hong Kong-based company, Luckyup Investment, to boost its one-year-term debt facility to US$25 million from US$15 million at an annual interest rate of 12%.
The company plans to use part of the money to undertake a feasibility study on upgrading the mine’s existing mill circuit and flotation facility to 1,300 tonnes per day and start a study on optimizing mining methods. The second study will look at stoping methods, production sequences and schedules to mitigate ore contamination from hydraulically backfilled stopes to increase productivity and to reduce production costs.
CaNickel–formerly Crowflight Minerals-anticipates that both of the studies will be completed in 2012.
In addition to Bucko Lake the company also has nickel, copper, and platinum group mineral projects in Manitoba’s Thompson Nickel Belt and Ontario’s Sudbury Basin.
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