Falconbridge‘s (FL-T) board of directors has given the thumbs up to a US$368-million underground definition drilling program at its Nickel Rim South deposit in Sudbury, Ont.
The five-year program will begin immediately, with planned expenditures of US$75 million in 2004.
At last count, inferred resources at Nickel Rim South totalled 13.2 million tonnes grading 1.7% nickel, 3.5% copper, 0.04% cobalt, 0.8 gram gold per tonne, plus platinum group element credits. Falconbridge says the resource boundaries remain open; surface drilling is expected to wrap up by the fall.
Falconbridge says it will have to spend another US$185 million to bring a mine into production following the underground drilling program. Initial production is expected in 2008. Net of US$141 million worth of projected pre-production revenues, the overall net capital cost is pegged at US$413 million.
Falconbridge figures the project’s pre-tax internal rate of return at around 40%, based on a nickel price of US$3.25 per lb. and a copper price of US90 per lb. Operating cash costs are estimated at minus US66 per lb. of nickel, thanks to byproduct credits.
“The addition of a large, high-grade inferred resource such as Nickel Rim South has dramatically changed our resource profile in Sudbury. Combined with our recent discovery of the Fraser Morgan deposit, we now have a resource base that will allow us to operate in Sudbury for at least the next 20 years,” said Falconbridge’s president and CEO Aaron Regent.
The news sent shares in Falconbridge $1.22, or 3.75%, higher to $33.82 in afternoon trading in Toronto on Mar. 11.