Xstrata to Double Production at Raglan Mine as Nickel Remains Strong

By Romina Maurino

http://www.resourceinvestor.com/

08/07/07

TORONTO (CP) -- Xstrata Nickel [LSE:XTA], the metals miner formerly called Falconbridge, said Tuesday it wants to nearly double output at the Raglan mine in northern Quebec to take advantage of a strong nickel market and possibly create some synergies with Canadian Royalties Inc. [TSX:CZZ], a junior explorer working in that area.

Switzerland-based Xstrata said it plans to spend about C$200 million (US$189.8 million) on exploration over the next five years at the mine in the Nunavik area of Quebec.

Raglan will be expanded to produce 2 million tonnes of ore per year, rising from the current 1.1 million tonnes to 1.3 million tonnes by the end of 2008 with additional capacity added beginning in 2011.

''We're making exceptional discoveries in terms of exploration results in this are so it's a very important mine for us,'' Xstrata Nickel spokeswoman Dominique Dionne said Tuesday.

''Nickel is a commodity that's doing very well right now, and we don't see in the immediate future any major new projects coming on stream, so we think that it's a great opportunity to accelerate the process to increase the production at Raglan in this current context.''

Barry Allan, an analyst with Research Capital Corp., said the expansion should allow Xstrata to increase its nickel output in the shortest possible time and is a decision that makes good sense given the resources the company already has in place at the camp.

''Raglan is one of the larger nickel output mines in Canada (and) there are other companies operating within that region, which may factor into Xstrata's thinking down the line as potential ore sources,'' he said.

''There have been junior companies operating in that area that have had some success in uncovering additional resources as well that may factor into an expansion plan.''

One Canadian company that may be affected by the expansion, he added, is Canadian Royalties, an explorer whose principal asset is the Raglan South nickel project in the general vicinity of Xstrata Nickel's mine.

At the very least, he said, it would make ''economic sense'' for Canadian Royalties to strike a deal to share Xstrata's infrastructure.

That Montreal-based company has undertaken its own feasibility study to develop its resource base and recently launched a C$75 million share offering to finance the initial phase of the project. It's currently proceeding with permit applications, as well as with exploration for additional resources.

Canadian Royalties CEO Richard Faucher said his company is focused on creating its own, independent infrastructure but has always maintained discussion with Xstrata as well its predecessor Falconbridge.

''If there is an opportunity for them to benefit from what we are doing and us to benefit from what they are doing, yes, I think there's room there for probably one, two, maybe even three or four mines,'' he said in an interview Tuesday.

''There is a lot of potential.''

While the company is not currently in any takeover talks with Xstrata, the two miners do have ongoing talks about sharing infrastructure and participating in anything that may be of common interest, he added.

Canadian Royalties shares were trading at C$2.57, down four cents or 1.5%, on the TSX.

After Xstrata's expansion, Raglan will be one of the largest nickel mines in the world, with output approaching 50,000 tonnes of contained nickel in concentrate per annum, together with copper and platinum group metal byproducts. It consists of three underground mines, one open-pit mine and a concentrator, with about 580 direct employees and 200 contractors.

Xstrata Nickel is a division of Anglo-Swiss Xstrata and is made up of five mines and processing facilities in Ontario and Quebec, a ferronickel mine and processing facility in the Dominican Republic and a refinery in Kristiansand, Norway.

It also has growth projects that include Nickel Rim South in Canada, Kabanga in Tanzania and Koniambo in New Caledonia and is the world's fourth-largest nickel producer, with annual managed production of more than 110,000 tonnes of refined nickel.

On Tuesday, parent company Xstrata Plc said its net profit for the first six months of the year had risen to of US$3 billion, up from US$1.1 billion for the same period last year, with support from new acquisitions. It also announced plans to offer US$1.06 billion for Eland Platinum Holdings Ltd.

Romina Maurino