Project mothballed as analyst releases negative report on 'parent; Canadian Royalties
It's official: Nunavik nickel mine 'in hibernation'
Canadian Royalties placed its troubled Nunavik Nickel Mine project in "hibernation" this week, one day after a devastating business report surfaced, chairman Glenn Mullan has confirmed.
Hibernation implies a temporary response to conditions, Mullan told the Montreal Gazette.
Canadian Royalties has packed up its equipment in Nunavik and laid off more than 70 employees until more favourable market conditions return, Mullan said.
The future looked brighter for Canadian Royalties earlier this year when its environmental permits, land leases and an Inuit benefits agreement for the mine project were finally in place.
But Canadian Royalties faced bankruptcy if it continued to spend more money on the Nunavik Nickel Mine.
Canadian Royalties lost $12.8 million during the nine-month period ending Sept. 30, according to the Nov. 16 Wright Comparative Business Analysis Report.
Overall, Canadian Royalties stock has "performed terribly," it says.
Canadian Royalties' shares stood at 27 cents earlier this week, down from a high of $4.25 a share in 2007.
"The stock price has fallen precipitously recently," notes the 40-page report.
The company's worth may have been inflated because Canadian Royalties was trading at three times its value and unprofitable for the past six years, according to the report.
A cash crunch, logistical snafus and a dispute with its minority partners had already brought work on the mine site between Salluit and Kangiqsujuaq to a standstill earlier this autumn.
But the global financial crisis dealt the final blow to the nickel project.
In August, when Canadian Royalties first started having problems, a May 2010 start-up for the Nunavik 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 in current economic conditions, where banks and other financial entities have little money to plow into new ventures.
As well, nickel prices are down. Nickel reached a low of $8,810 per tonne on Oct. 24, the lowest level since July 2003.
The demand for nickel, a metal used to produce stainless steel, has also declined, forcing even established mines to cut back on their operations. Xstrata, which owns Nunavik's Raglan mine, recently decided to close down two less-profitable nickel mines in Ontario ahead of schedule.
Russia's Norilsk Nickel, the world's biggest producer of nickel and palladium, had agreed to buy the nickel concentrates produced by the mine and bought a $25 million stake in the project last year.
But Norilsk, also facing tough times, has chopped its investments in its working mines and curtailed its support to community projects in Russia.
The Nunavik Nickel mine's open-pit and underground mines would have created 300 jobs and produced nickel, copper, cobalt, platinum and palladium and provided profit-sharing cheques to Puvirnituq, Salluit and Kangiqsuaq.