Mining suppliers serving the red hot mining industry in Northern Ontario can be excused for thinking they’re on a different planet. While the evening news and the headlines in the financial press bemoan the fallout from the sub-prime mortgage mess, record-high fuel prices and rising unemployment, cities such as Sudbury, Timmins and North Bay are bursting at the seams.
New headframes are popping up across the region, exploration spending is at an all-time high, apartment vacancy rates are close to nil and the newspapers are full of help wanted ads.
In Sudbury, the heart of the region’s mining industry, the three major players – Vale Inco, Xstrata and FNX Mining - will spend more than $1 billion this year on new mine development projects.
Vale Inco alone will spend $600 million, including $400 million developing Totten Mine, the company’s first new mine in Sudbury in more than 35 years. And that’s just a taste of what’s to come.
The company has also spent $45 million for a feasibility study and early execution work for its Copper Cliff Deep project, which will involve the sinking of a new and deeper shaft to access new ore zones, including its nearby Kelly Lake deposit.
Copper Cliff Deep
“The feasibility study is complete and the project is in the finals stages of review,” said Fred Stanford, president of Vale Inco Sudbury Operations. The price tag for Copper Cliff Deep hasn’t been finalized, but “it will be big,” he said.
Site preparation is being carried out and equipment, including a hoist, has been ordered in anticipation of a positive decision.
“The industry is so hot around the world and equipment suppliers are so heavily booked that if we hadn’t made some early decisions on putting in placeholders for equipment, we would be two years behind the eight ball,” said Stanford.
In June, Vale Inco announced that exploration drilling at Creighton Mine confirmed high-grade mineralization between the 7,000 and 10,500-foot levels, with the potential to double proven and probable reserves to 32 million tonnes.
“We’ve been mining at Creighton for 105 years and we continue to find new ore,” said Stanford. “We’re in the very early stages of studying Creighton Deep, but it’s a project we have a lot of hope for.”
Other capital spending projects include the $132 million development of the 170 orebody at Coleman Mine, further work on emission reductions, a possible mill expansion and upgrading of existing assets “so they’re ready for the next 30-year run.”
To cope with the impending retirement of a quarter of its workforce, the company is on track to hire 500 people by the end of this year.
“I’ve been in the area for 27 years and I’ve never seen it like this. It’s absolutely incredible,” said Stanford.
Over at Xstrata Nickel, the mood is equally buoyant.
“Since we took over in 2006, we’ve poured in about $482 million in capital improvements at our Sudbury operations,” said Mike Romaniuk, vice president of the company’s Sudbury operations.
Xstrata’s biggest project in Sudbury is the development of its Nickel Rim South Mine, scheduled to begin producing ore next year. The final price tag for Nickel Rim South will be in excess of $800 million.
“It will be the best mine we’ve ever developed in Sudbury in terms of value,” said Romaniuk. “It will produce between 12,000 and 15,000 tonnes of nickel, up to 50,000 tonnes of copper and several hundred thousand ounces of precious metals annually. It’s an extremely rich orebody.”
Xstrata has also spent $70 million to date on its Fraser Morgan project and has received board approval for another $280 million to bring it into production. Other projects include the recent completion of a $30 million plant for recycling cellphone and laptop batteries (as well as other custom feed material) and a $175 million investment to increase throughput at its Strathcona mill to 3.4 million tonnes of ore per year.
Like Vale Inco, Xstrata Nickel is on a hiring spree. The company brought onboard more than 300 employees in 2007 and hopes to recruit another 400 by the end of this year.
FNX Mining, the new kid on the block, isn’t in the same league as Vale Inco and Xstrata, but there’s nothing trifling about its contribution to the region’s economy. Since 2001, when it acquired five properties from Inco, FNX has spent just under $600 million bringing three of the properties into production.
It started by refurbishing two past producing mines – Levack and McCreedy West – then moved quickly to bring its Podolsky property into production.
Podolsky
“Podolsky had no surface or underground infrastructure, but we were able to take advantage of it pretty quickly,” said FNX investor relations manager David Constable. “It will average 4.5 per cent copper, a half a per cent nickel and six grams per tonne of precious metals, but we also have massive sulphide high-grade footwall-type veins, so some quarters we’ll deliver 10 to 12 per cent copper, depending on the mining sequence.”
FNX spent $150 million over three years to bring Podolsky into production, and that included a 2,600-foot shaft sunk by Dynatec Mining Services, a mining contractor that started off as a partner and is now owned outright by FNX.
An aggressive exploration program has paid off big time for FNX, resulting in several exciting discoveries, including the Levack footwall deposit on which the company will spend $60 million this year with production planned for mid-2009.
The new kid on the block now has close to 700 employees in Sudbury.
With the operating expertise of Dynatec Mining Services, a crackerjack exploration team and money in the bank thanks in part to a recent infusion of cash from Gold Wheaton Corp. as an upfront payment for future deliveries of precious metals from its Sudbury operations, FNX is poised to spread its wings.
“There are a number of companies out there with advanced projects that are facing a really tough debt market,” said Constable. “They can’t go out and raise debt. You have to sell your soul. We think we can offer an opportunity. We can come in and offer operating expertise and we can put some equity into it. It’s a chance for us to expand outside of Sudbury and perhaps diversify into other commodities.”
A fourth player in the Sudbury Basin, First Nickel, also has ambitious plans for Lockerby Mine, acquired from Falconbridge, and elsewhere across Northern Ontario, exploration and mine development activity is at record levels. De Beers has just spent $1 billion developing Ontario’s first diamond mine (See Page 37), Lake Shore Gold is sinking a shaft at its Timmins West property (See Page 7), Goldcorp has ambitious plans for its Red Lake, Musselwhite and Timmins operations (Page 48), and the list goes on.
Exploration expenditures are also at an all-time high, exceeding $500 million in Ontario in 2007 and projected to come in at $629 million this year. In the Sudbury Basin alone, Vale Inco spent approximately $50 million on exploration in 2007, Xstrata is spending $25 million this year and FNX is spending $20.7 million.
All of this activity has been a bonanza for the mining supply companies in Sudbury, Timmins and North Bay.
Almost all of them are maxed out, said Dick DeStefano, executive director of SAMSSA, the Sudbury Area Mining Supply and Services Association.
“There has probably never been as much investment and activity as we’re now seeing in the mining industry in Northern Ontario,” observed DeStefano. “We are without question the pre-eminent mining supply centre in North and South America. There are 16,500 people employed in the northeastern Ontario mining supply cluster – double the number of people employed directly by the mining companies.”
Stanford, of Vale Inco, tips his hat to the supplier community.
“I can’t believe that there’s any in the world better than what we have here,” he said. “They supply us, they supply Xstrata, and they compete around the world, which is very good for us.”
Consultants
Engineering consulting offices of Hatch, Golder and McIntosh have quadrupled in size, world-class mining contractors such as J.S. Redpath, Cementation and Dumas Contacting are busier than ever and drilling consumable manufacturers like Boart Longyear, Sandvik and Atlas Copco are going flat out in North Bay.
The Sudbury area mining cluster is further reinforced by research groups such as MIRARCO and CEMI, mining programs at Laurentian University and the region’s four community colleges, the Ontario Geological Survey and the Ontario Ministry of Northern Development and Mines.
Responding to layoffs in southern Ontario’s auto sector, the provincial government is even running TV commercials for a retraining program that promotes the mining industry as a booming sector.
The general consensus is that the current supercycle, fueled by the ascendance of China and several other rapidly developing economies, will endure for decades, with a few ups and downs along the way.
As rosy as things are, there are challenges, too. Like the wear and tear on the region’s roads from ore laden trucks, and the struggle to find a place to live.
“My daughter had a job in Sudbury, but she couldn’t take it because she couldn’t find a place to live,” said Constable. “She finally found another job in southern Ontario that didn’t require her to race around Sudbury at breakneck speed and try to beat everyone else to an apartment.”
Barring that gripe, “People have suddenly realized that Sudbury isn’t a bad place to be,” said Constable. “And it isn’t a bad place to be as far as your investments are concerned.”
