Inco earmarks $100 million to open 2 Thompson mines

Still under fire for a recapitalization plan designed to fend off a hostile takeover, Inco Ltd. (TSE) is setting aside $100 million to sustain production in its Manitoba division.

Over the next several years, Inco says it will develop a new open pit nickel mine at its Thompson, Man., operations which last year produced 130 million lbs or 28% of the company’s worldwide nickel output.

As part of a plan to maintain its position as the world’s biggest nickel miner, Inco will also reopen the old Birchtree mine near Thompson which was mothballed in 1977 after producing 300 million lbs of nickel.

However, the company has been careful to point out that the new projects do not represent an expansion of its existing operations in the prairie province.

“We are simply responding to the demands of the marketplace by sustaining current rates of production,” said Inco’s Manitoba division spokesman Dan McSweeny.

He said the new Thompson Open Pit South, which is being developed at a cost of $42 million, will compensate for any losses in production when the Open Pit North goes out of commission in 1990. Since production started at the north pit in 1986, output has spiralled to just under 100 million lbs of nickel annually.

According to Gerry Marshall, the Open Pit South represents the remaining port ion of the Thompson mine crown pillar and once the overburden is removed, Inco will mine the ore zone between the surface and the 400-ft level.

With mineable reserves standing at 150 million lbs of nickel, the new mine is expected to be in production for about five years, a relatively short spell when compared to the lifespan predicted for nearby Birchtree.

Known reserves of 700 million lbs are sufficient to support a mining operation for 20 years and the orebody is still open at depth. “We will develop the lower portion of the mine by extending the bottom horizon from 2,300 ft to 3,900 ft,” said Gerry Marshall, vice-president of mining at Inco’s Manitoba division.

He told The Northern Miner that Inco will utilize electric hydraulic as opposed to diesel equipment in an operation which is expected to be “state of the art” in the nickel industry. “We believe electricity is environmentally better and it is no more expensive than diesel,” he said.

To accommodate the plan, Inco will deepen the existing shaft from 3,370 ft to 4,390 ft. and when operations begin in 1989 ore will be trucked to Inco’s 1,600-ton-per-day Thompson milling facility.

No immediate changes to the mill are contemplated but as time goes on and Inco drifts into lower grade ultramafic type ore, Marshall said the company may make some alterations to the facility.

While productivity per man shift is expected to be twice what it was when operations closed down in 1977, Birchtree will employ 160 mining personnel when it is up to full speed. However any increases in manpower will eventually be eroded by further improvements in productivity, he said.

Financing for the Manitoba projects were approved before Inco announced a controversial $1.05 billion recapitalization plan which includes a special dividend of $10(US) per share.

“Before the board went ahead with the recapitalization announcement, it made sure that sufficient funds are available to maintain a capital expenditure level of about $300 million(US) annually,” said Inco spokesman David Allen.

“Inco wants to maintain its position as the low cost nickel producer and leader in the field in terms of productivity and technology,” he said.

“The board is satisfied that cash flow projections over the next ten years will enable them to do that.”