A new labour deal at Xstrata Nickel combined with improving mineral prices has spurred Ursa Major Minerals to re-start an open pit and begin shipping base and precious metals ore to Sudbury for processing.
The junior miner revived its mothballed Shakespeare nickel-copper mine in early February with plans to ship 200,000 tonnes of ore this year from its Shakespeare pit, 70 kilometres west of Sudbury, to Xstrata’s Strathcona mill for processing.
The company mobilized their contractor, Pioneer Construction, Feb. 3 to begin crushing and hauling out about 30,000 tonnes of stockpiled ore left on the property when operations halted in October 2008 as metal prices plunged.
Ursa Major president-CEO Richard Sutcliffe was expecting to make a financing statement in mid-February of some working capital to get the mid-tier miner moving forward this year.
While there’s revenue in the rock sitting in inventory, Sutcliffe said it often takes several months to get paid after they ship ore to Xstrata’s nickel smelter and their copper smelter in Rouyn-Noranda, Que.
"We have to sustain our working capital during that period for mining, crushing and hauling until our revenue stream is loaded."
Ursa Major struck a two-year custom milling contract with Xstrata for 1,000 tonnes a day. He’s optimistic once they have demonstrated the ability to delivery on a steady basis, Xstrata will want more.
The Shakespeare open pit is north of Agnew Lake near the village of Webbwood on Highway 17. The pit has a 10-year mine life of nickel, copper, cobalt and other precious metals.
The company was finalizing its haul contracts in February with plans to truck all its tonnage on some back-country logging roads to hook up with Highway 144 leading to the Strathcona mill.
Though the Shakespeare mine is only a few kilometres north of the Huron Central Railway, which runs east to Sudbury, Sutcliffe is currently ruling out that option for now.
Sutcliffe said with no direct rail links into the Sudbury mill, having to twice load and unload from rail to truck at each end would be inefficient.
"We've certainly had some interest from the Huron Central and I’d like to continue that option."
The easy fix is to build a processing mill of their own. A combined mine and mill project is tabbed at $141 million.
"These are tough credit markets and financially we’ve been hammered through the last 18 months," said Sutcliffe. "We've got to rebuild financial strength and get back into stronger credit markets before we can tackle that project."
The long strike at Vale Inco is taking about six per cent of the world’s nickel supply off the market and has sharpened up prices.
Nickel prices were at $7 (US) per pound before the strike started last July and were hovering in mid-February at $8.20.
"We're getting into this because we believe the economics are pointing to strengthening metal use as the (economic) recovery kicks in."
With recent reports of increased purchasing orders in the steel and manufacturing sectors across North America, Europe and Asia, he’s optimistic nickel prices will stay above $7 to keep them mining.
"Nickel is a proxy for steel and stainless steel demand."
After a failed merger with Canadian Arrow Mines last summer, Sutcliffe said finding another partner is not on the immediate radar, but wouldn’t rule it out in the future.
The company has also struck an impact benefit agreement with the Sagamok Anishnawbek First Nation, a deal they will revisit this winter in a series of meetings with the North Shore communities. Prior to the pit’s closure, about 25 per cent of the workforce was First Nation, something Sutcliffe wants to repeat.
Sutcliffe said using contractors was the quickest way to get restarted and get cash flowing. As the company’s finances improve, Sutcliffe said they will evaluate creating their own workforce.
Though Shakespeare is their flagship property, the company has a number of other Northern Ontario exploration properties, including its Nickel Offset on Sudbury’s North Range.
The company expects to continue drilling targets on this Sudbury property having, tapped into a massive sulphide lens.
"It's a great satellite project for us."
The company also has an early exploration base metals play near Magma Metals’ Thunder Bay North project in northwestern Ontario.
"It's got the makings of an environment where there are going to be new discoveries. It’s a grass-roots project but we are keen to build up some drill targets and test that." www.ursamajorminerals.com