Diamond Fields aims to advance Voisey Bay

Advanced negotiations between Inco (TSE) and Diamond Fields Resources (TSE) could result in an agreement whereby the large nickel producer acquires an interest in Diamond Fields’ Voisey Bay nickel-copper-cobalt project in coastal Labrador.

But no matter what the outcome, Diamond Fields is expected to play a leading role in advancing the project to production. More than a few eyebrows were raised recently when the company announced that it did not intend to sell a majority or controlling interest in Voisey Bay. The announcement was surprising because the nickel business is complex and requires an organization with highly specialized expertise in a broad range of areas, from mining through to marketing.

Clifford Carson, a nickel-marketing executive who recently left Falconbridge to take on the post of president of Diamond Fields, admits he faces a huge challenge.

“This is a different situation in that you have a junior that could become a senior, or at least play in a senior game,” he tells The Northern Miner. “The opportunity to be involved in the design and development of that kind of transformation is exciting. It represents a lot of challenges, but challenges are real opportunities to do something different and something better.” The idea of a junior staying in the driver’s seat is not only unusual, Carson admits; it is unprecedented.

Carson says an alliance with an existing nickel producer would have mutual benefits. “We don’t have all the expertise in terms of the technical knowledge and in terms of the people. The metallurgy and technology are specific to the industry, and we need to have some kind of relationship which allows [us to gain] access to that expertise.”

Carson says the Voisey Bay deposit is of such magnitude that it will affect not only the nickel industry, but provincial politics and economics as well. And based on its potential for open-pit mining, favorable metallurgical characteristics, consistency of grade and proximity to tidewater, the deposit is expected to be a low-cost producer.

Asked about the size of the deposit, Carson says there is still no proven reserve number and he can discuss only Voisey Bay’s potential, based on the more than 100 holes drilled to date.

“We have something in the order of 30 million tonnes of very high-grade material within the ovoid,” he says, adding that drilling outside the ovoid (mainly to the west) suggests potential for an additional resource of about 60-70 million tonnes of lower-grade mineralization which is still open-ended.

The project still has plenty of blue-sky, and because of the way that nickel deposits form, Carson predicts that other significant discoveries will be found. He points out that the main nickel-producing regions of the world — Sudbury and Thompson in Canada, Noril’sk in Russia, Kambalda in Australia, plus a nickel belt in China — all have more than one mine. “The geological reasons why nickel deposits form imply that there must be more [than one].” Diamond Fields intends to move the project forward on its own, or with the help of Teck (TSE), which earlier this year bought a 10.4% stake in the company.

Carson says the strategy of maintaining control is based on the goal of having shareholders realize the maximum value of the company’s assets. “In order to get maximum value, we have to be responsible [with regard to] how Voisey Bay is developed. This project is of a size that if you try to bring everything to market as quickly as possible, you could depress the nickel price, hurt existing producers, and hurt yourself.”

And, he says, there may be other nickel producers that would prefer the project not come on stream too quickly. “In order to maximize value, we [Diamond Fields] have to be cognizant of the timing and the manner with which this project is developed,” Carson adds. “In order to do that, we need to maintain complete control…. Our strategy is not to allow a takeover by one of the seniors, but to work with them on how it might be done together, or a variety of different possible combinations.”

During the next few months, the company intends to focus on understanding the nature of the Voisey Bay deposit and how it can be treated. “I don’t think we can have anyone better than John Paterson [vice-president of nickel operations] to help us do that,” Carson says.

“There has not been an integrated plant built for 25 years, and there has been a lot of technological change in those years,” he adds. “Hydrometallurgy will be extensively investigated, but it’s still wide open.” Metals recovery using hydrometallurgy is well-established. Sherritt, in particular, is a technological leader and uses pressure hydrometallurgical processes for treating nickel, cobalt and zinc concentrates, as well as refractory gold ores.

Diamond Fields will be looking at all processing options, Carson explains, such as producing concentrate, matte or metal by both pyrometallurgy and hydrometallurgy. Hydrometallurgical processing of copper concentrates is not yet considered commercially viable. However, Carson says, these may be sold up front depending on the technology chosen at the feasibility stage.

On the financial front, Carson points to the expertise of other directors and officers, including director Edward Mercaldo and co-chairmen Robert Friedland and Jean Boulle. “These are impressive people, with a strong grasp of structure, finances and deal-making.”