Nickel prices are still in the dumps but that’s not stopping nickel juniors, Canadian Arrow Mines (CRO-V) and Ursa Major Minerals (UMJ-T), from planning ahead for a price comeback.
The two companies are considering merging to create what they say will be a stronger, more diversified nickel development company.
In fact, Canadian Arrow president and CEO, Kim Tyler, says the junior nickel sector is in need of consolidation because there are so many companies out there.
“I think this is the start of it,” Tyler says. “We believe strongly that the future is not going to be what it was in the last six months; things are going to have to turn around.”
Ursa Major Minerals president and CEO, Richard Sutcliffe, says Ursa Major won’t stop with the Canadian Arrow merger.
“We would like to be a leader in the consolidation process,” Sutcliffe says.
If the deal goes through, Canadian Arrow shareholders will receive one newly issued Ursa Major share for every 1.5 Canadian Arrow shares, warrants and options. The company will keep the Ursa Major listing because it’s listed on the Toronto Stock Exchange, whereas Canadian Arrow is listed on the TSX Venture Exchange. Both Ursa Major and Canadian Arrow have agreed on an exclusivity period during which they will complete due diligence and a definitive agreement for the merger.
The merger would pair up nickel juniors with different upsides including high grade underground with low grade open pits, copper by products with precious metal by-products and different management niches; Canadian Arrow’s management used to work for majors like Rio Tinto, Suncor and Vale Inco while Ursa Major has a background in the junior mining realm.
Ursa’s portfolio includes the fully permitted Shakespeare open pit nickel project located 70 km west of Sudbury. Ursa was shipping ore to the Xstrata Nickel’s Strathcona mill up until last October when the project was put on care and maintenance asnickel plunged to nearly US$4 per lb. Sutcliffe says the company needs to see nickel above US$7 per lb. to go ahead with production, though recently it’s been hauling a 5,000-tonne stockpile leftover from last year, which is generating some revenue for the company.
The feasibility study put probable reserves at 11.2 million tonnes grading 0.33% nickel, 0.35% copper, 0.02% cobalt, 0.19 gram gold per tonne, 0.33 gram platinum and 0.37 gram palladium per tonne fro about 86 million lbs. of nickel plus by-products and another 15 million lbs. nickel under the indicated resources category.
The company had been hauling at a rate of about 500 tonnes per day but the project has the capacity to support a 4,500 tonne per day operation if it had its own mill. The feasibility study put the cost of a mill at $140 million. Sutcliffe says the company is currently in talks with Xstrata to start hauling ore again but admits it will be a while before it can go ahead with building its own mill.
“We are going to need capital markets that allow project financing for driving the mill build outs,” Sutcliffe says. “A modest improvement in nickel prices would allow us to resume haulage operations with Xstrata and we’re in discussion with them on that.”
Ursa Major’s other prospective project is the Shining Tree nickel-copper property about 110 km north of Sudbury near the town of the same name. The near-surface project has an indicated resource of about 1 million tonnes grading 0.71% nickel, 0.36% copper and 0.02% cobalt and an inferred resource of 1.5 million tonnes grading 0.67% nickel, 0.36% copper and 0.03% cobalt.
Canadian Arrow’s main asset is its Kenbridge nickel-copper sulphide project near Kenora, Ont. The company has been sitting tight since finishing a preliminary economic assessment last August, just before Lehman Brothers collapsed that suggested it would cost $108-million in capital expenditures to get the project up and running.
The deposit has a 620-metre shaft but has never been mined. Measured and indicated resources total 7.1 million tonnes grading 0.62% nickel, 0.33% copper and 0.016% cobalt for 44,322 tonnes of nickel (98 million lbs). Now Canadian Arrow needs cash for a feasibility study but has been sitting tight waiting for markets to improve.
Should the two nickel juniors merge, they won’t be taking any action right away. Their combined treasury of about $1 million means the company will be looking for strategic financing opportunities as it does a little drilling on other exploration projects and waits for the nickel price to rebound.
But Tyler believes that Kenbridge and Shakespeare are of the lowest-cost nickel producers in the province and would be of the first to go into production when prices improve.
Canadian Arrow shares were down 1¢ today to 7¢ apiece on a trading volume of 120,000. The company has about 71 million shares outstanding.
Ursa Major shares were unchanged at 14¢. The company has 44 million shares outstanding.