Low nickel prices have forced First Nickel Inc. (FNI) to restructure operations at its Lockerby nickel-copper mine in Sudbury and cut jobs.
In a Jan. 12 release, the Toronto-based miner said it is cutting 30 per cent of its workforce and 75 per cent of its contractors but will restart underground ramp development below the 6800 level to reach the 7100 level by the first half of 2016.
The company’s board of directors recently approved a restructuring plan they hope will extend the mine’s life and “preserve” 115 jobs.
Two years ago, declining nickel prices forced the company to scrap plans for the ramp development causing management to contemplate closing the mine.
"The employees at Lockerby have done a remarkable job in recent months to improve performance at the mine, with nickel production in the second half of 2014 improving significantly compared to the first half,” said company president-CEO Thomas Boehlert in a statement. “However, the combination of persistently low nickel prices and our underlying cost structure has had a negative impact on our ability to generate the funds required to continue development of the mine."
Vern Baker, the former president of Duluth Metals, was brought in as vice-president of operations to conduct a review of the mine’s economics to determine if it could keep operating in a safe manner. This work led to the restructuring plan.
The company said Baker has a solid track record of keeping underground mines operating where they would have otherwise been closed.
The company said the restructuring plan is founded on productivity improvements that will provide for a reduction in costs while achieving consistent nickel production.
Exploration diamond drilling at Lockerby will begin with a planned 6,300 metres of underground exploration drilling this year and 7,200 metres next year to find new reserves.
The company said in a release that production for this year and next is not expected to be significantly impacted. Production and cost guidance numbers will be released in late January.
A new technical report on Lockerby will be filed during the first half of this year.
While the year-end numbers are not yet in, the company expects Lockerby will produce approximately 14 million pounds of nickel and approximately 7 million pounds of copper in 2014.
"Our primary objective over the past month has been to determine how we could safely and economically continue to operate the Lockerby mine into the future,” said Boehlert. “We are implementing a plan that will see production continue through 2016, preserve 115 FNI jobs, restart and expand our exploration drilling program and potentially add to mine life. The Lockerby team has successfully met past challenges and I am confident in their ability to execute on the restructuring plan, ensuring that the mine will be viable going forward."
Furthermore, the company is talking with its principal shareholders on possible refinancing or extension of the shareholder debt instruments and credit facilities prior to their maturities in March 2015.
