Future of Nickel Mine looks grim

Canadian Royalties Inc. beset by adversity

By JANE GEORGE

Recent information and comments from Canadian Royalties Inc. show the company's plan for a stand-alone nickel and copper mine in Nunavik continues to face severe financial obstacles.

The collapse of the Nunavik Nickel mine project is a casualty of the company's legal disputes with its former partner, the decline in metal prices and "generally unfavourable capital markets," Glenn Mullan, chairman of the board as well as interim president and CEO of Canadian Royalties, said in an April 1 news release.

Canadian Royalties racked up a $181-million loss in 2008.

The company's 2008 loss amounts to $1.79 per share and compares with an annual loss of $5.6 million or seven cents per share in 2007.

Canadian Royalties' shares stood at 19 cents earlier this week, down from a high of $4.25 a share in 2007.

Last August, when Canadian Royalties first started having financial problems, a May 2010 start-up for Nunavik's second nickel mine still seemed possible.

But, for work to resume, the company needed to raise another $130 million for the $500-plus million project.

This proved impossible as the global financial crisis kicked in and metal prices went into a nosedive. Banks wanted to loan money only to the most financially-secure ventures.

By the end of last year, Canadian Royalties had packed up its equipment in Nunavik and laid off more than 70 employees.

Mullan said that he still believes the property, 20 kilometres south of Xstrata's Raglan Mine, has "significant value to all stakeholders and will ultimately be developed under more favourable commodity pricing conditions."

But the company's overall financial situation doesn't look bright. At the end of 2008, Canadian Royalties had $24.6 million of cash and long-term debt of $96.9 million.

This compares with $37 million of cash and $7.7 million of long-term debt in 2007.

The company made a $4.8 million payment, due March 31, on last year's $137.5 million financing and it is trying to renegotiate its terms.

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