Made in Canada

Civil contractor IKC Borealis employees Tim Goudie (left) and Peter McKay using a Trimble GPS 5700 to survey at Voisey’s Bay port site, with “Old Joe” in the background. The survey will assist heavy equipment operators to determine the amount of cut required at the concentrate storage building. The surveyors are enjoying an unusual mild winter in Voisey’s Bay.

It must be nice to be Inco Ltd. today. As a producer of nickel it is second only to Norilsk in Russia. Nickel is hot right now, with the US$6/lb price at a 14-year high, and robust demand driven by the burgeoning Chinese stainless steel business.

The company’s future is taken care–plentiful reserves at its Sudbury operations and ownership of the two largest nickel projects currently in development: Voisey’s Bay in Labrador and Goro in New Caledonia.

The Cdn$3.1-billion Voisey’s Bay project consists of a mine and mill in northern Labrador with a 14- to 30-year lifespan, and leading-edge processing facilities to be designed and built in southeast Newfoundland. The project received the corporate nod a year ago; construction is well underway, with production expected to begin in mid-2006.

The picture is not all rosy, of course. Inco’s nickel cash unit costs last year (after byproduct credits) were US$2.15/lb, well above the expected US$1.65-1.70. A three-month strike in Sudbury was partly to blame, but another factor was the need to purchase feed.

Although Inco operates six nickel mines in Ontario and two in Manitoba as well as a nickel laterite mine in Indonesia, the company’s smelters also require purchased feed. The Voisey’s Bay project in Labrador will begin to fill that gap two years from now. “Between 2006 and 2012 [ore from Voisey’s Bay] will provide low-cost feed for our mills in Sudbury and Thompson and help these operations improve productivity,” says Inco’s COO Peter Jones. “After 2012 we will have developed a tidewater-accessible processing plant in Newfoundland.”

Nickel consumption is expected to grow, but nickel production will also be growing, not just from Voisey’s Bay, according to a Commodities Research report by Barclays Capital published in early February. The report predicts global shortfalls in 2004 and 2005 (with a resultant peak in nickel price estimated at US$7.26 and US$4.48/lb, respectively) followed by a surplus in 2006 and 2007 (with the price estimated to slip to US$3.29 and US$2.95/lb, respectively).

There is no knowing the metals prices when Voisey’s Bay begins production, but at least today’s high prices are allowing Inco to finance the project from cash flow.

In early February CMJ interviewed Phil du Toit, managing director of Voisey’s Bay Nickel Co. (VBNC), the wholly-owned subsidiary of Inco that is developing the project. Another resource used for this article is the Voisey’s Bay Project Technical Report, completed on Aug. 31, 2003, and posted at www.SEDAR.com under “Inco”.

Project history and plan

Inco bought 100% of the Voisey’s Bay property in August 1996 by acquiring its owner, Diamond Fields Resources Ltd.

In 1997, SNC-Lavalin was hired for project construction management of a 20,000-tonne/day mine and mill at Voisey’s Bay. Road construction began in the spring, but stopped in June when aboriginal groups commenced legal proceedings.

Environmental public hearings began in 1998, and in April 1999 the panel issued a report; one of its recommendations was to reduce potential environmental effects by cutting the daily rate to 6,000 tonnes. The project was only able to proceed once VBNC and the province arrived at a Development Agreement (see page 14) in mid-2002.

SNC-Lavalin compiled a bankable feasibility study from mid-2002 to March 2003. Inco’s board approved the first phase of the project on March 20, 2003. SNC Lavalin/BAE-Newplan was then hired to perform engineering, procurement and construction management.

The plan forsees the Ovoid pit feeding the mill from 2006 to mid-2019, starting at 6,000 tonnes/day. The operation will produce annually 110 million lb Ni in concentrate (containing 5 million lb Co and up to 15 million lb Cu), plus 70 million lb Cu in a separate copper concentrate.

The design estimates an open pit mining cost of US$3.34/tonne of material, a milling cost of US$13.01/tonne of ore and general and administrative costs of US$13.33/tonne of ore. The project’s operating cost net of byproduct credits is estimated at US$0.93/lb Ni, and the total cash cost at US$1.10-$1.15/lb Ni.

The capital cost of the Voisey’s Bay project over its estimated 30 years is Cdn$3.1 billion, of which Cdn$1.2 billion (US$776 million) has been earmarked for Phase One, with a 6.3-year payback. This includes the mine and mill, underground exploration, R&D into downstream processing, and concentrate handling facilities in Ontario and Manitoba. The project is currently on budget in Canadian dollars, but because of the weak US dollar, the estimated capital expenditure for Phase One has increased to US$888 million.

Phase Two is the construction of a Cdn$800-million commercial processing plant at Argentia. The third phase is moving into underground mining beginning around 2018, depending on exploration results.

The Canadian government has committed up to Cdn$150 million within existing programs, covering some of the project’s R&D, labour, training and infrastructure costs.

Port and mine site construction

The mine is in northern Labrador, between Voisey’s Bay and Anaktalak Bay. The closest towns are Nain and Natuashish (home of the Mushuau Innu from Davis Inlet).

Access is by air or sea. A permanent 1,600-m gravel airstrip with edge lighting and approach aid equipment was completed in late 2003 for transporting personnel and perishables.

A permanent deep-water port is being built in Anaktalak Bay from which goods are trucked 11 km to the minesite. The port will include storage for 175,000 tonnes of concentrate with a receiving station, a tripper conveyor system and reclaim conveyers, and a 1,500-tonne/hour ship-loader. Nickel concentrates will be shipped year-round except for two six-week periods, when ice is forming and breaking up. Copper concentrate and fuel will only be shipped during the open water season, late June to early December.

Overburden stripping began in June 2003. Construction support facilities were completed and the concentrator site was excavated and foundation poured by November. An accommodation complex will be complete in 2005, with 255 single bedrooms. The 25-MW-capacity power plant (five 5-kV Caterpillar generators fueled by diesel) will supply the site’s electrical needs.

Mine and concentrator

The Voisey’s Bay deposits consist of massive and disseminated nickel sulphide in magmatic troctolite. They lie within the Nain Plutonic Suite, emplaced between 1,350 and 1,290 Ma.

The Ovoid, Mini-Ovoid and part of Southeast Extension deposits are being planned as an open pit (Voisey’s Bay reserves in the table on page 12), whereas the Reid Brook and Eastern Deeps deposits (Voisey’s Bay resources in the table will likely be mined underground. Compare these figures with the reserves at Inco’s other operations.

The block model of the deposits was developed by Inco Technical Services Ltd. for the feasibility study, and the pit geometry and mine plan were designed by Independent Mining Consultants Ltd. The overall strip ratio is 1.3:1 waste:ore; the waste includes 6.2 million tonnes of overburden that will be removed before 2006. The ore production rate will increase from 6,000 to 7,200 tonnes/day in 2013, as the grade decreases.

The ultimate pit dimensions will be 1,200 m long, 600 m wide and 135 m deep. Benches 5 m high will be faced at either 10 m or 20 m in the final pit wall. Inter-ramp slope angles will vary from 43 to 53, and the overburden slopes will be 17. The haul road will be 25 m wide allowing for two-way traffic, with a gradient of 8%.

Two primary blasthole drills and one secondary rig will dri
ll 15-cm-diam holes 6.5 m long in the ore, on a 3.5-m x 4-m pattern. The waste rock will be drilled on a 4.5-m x 5-m pattern using a cap rock drill. A blend of emulsion and ANFO will be loaded into the holes at 1.0-1.2 kg/m3 and detonated every three days, to break approximately 11,000-m3 blocks of rock and ore. This will be recovered by a wheel loader and a hydraulic shovel (each 11.5 m3), and hauled in three 90-tonne trucks to the primary crusher by the mill. Waste and overburden will be hauled to nearby dumps.

Sumps within the pit will collect water runoff as well as pit inflows, which will be pumped to a double-lined pond near the millsite and treated.

Annual ore plus waste production will start at 3 million tonnes in 2006 and reach a high of 6.2 million tonnes by 2011, and then decline late in the pit life. Another haul truck will be added when production peaks.

The concentrator will treat the ore using conventional technology, with slaked lime for pH control. A 1,100-mm x 1,750-mm NT gyratory crusher from FFE will crush the ore to -15 cm. The wet grinding (to 80% -100 mesh) will be done in a 22-ft-diam x 9-ft-long 3,500-hp SAG mill followed by a 16-ft-diam x 22-ft-long 3,500-hp ball mill, both from Outokumpu.

All of the conventional flotation cells in the plant are from Dorr-Oliver Eimco. The rougher-scavenger circuit uses 17 1,350-ft3 cells to produce two concentrates and a final tailings product. The rougher concentrate is cleaned in nine 300-ft3 cells, followed by copper-nickel separation in nine 300-ft3 cells. The “tails” portion of the copper- nickel separation makes up the high grade nickel concentrate, while the concentrate is cleaned in two stages of MinnovEx 11-m high flotation columns (two at 3.6-m-diam and two at 3.1-m-diam) with closed-circuit scavenging in six 300-ft3 cells. Copper concentrate is produced from this circuit, with the “tails” portion reporting to the middlings concentrate. The rougher-cleaner tails and scavenger concentrate are joined together and cleaned in two stages of conventional flotation, using six 1,350-ft3 cells, and four 300-ft3 cells, in order to produce a second component of the middlings concentrate. Tailings from this circuit are discarded to final tails.

There are two vertical regrind mills from Metso in the flowsheet. The first (400 hp) liberates pentlandite from chalcopyrite in the cleaned rougher concentrate. This allows the production of high-grade nickel concentrate with very low copper content, and copper concentrate with very low nickel content. The second regrind mill (650 hp) enhances the liberation of pentlandite from pyrrhotite in the scavenger-cleaner flotation circuit, allowing for higher levels of pyrrhotite rejection with low nickel losses.

The high-grade nickel, copper and middlings concentrates are dewatered in two steps. The Outokumpu high-rate thickeners (three 9-m-diam units and one 23-m diam) discharge to four 42-m2 Larox pressure filter units (PF42/60 M1 60), which reduce moisture content to 8%. Tailings are dewatered in the 23-m-diam thickener and pumped to Headwater Pond.

The concentrates will be trucked to the port for storage and transportation. Most of the high-grade nickel concentrate (25% Ni, 1.2% Co) will be shipped to Thompson. The balance of high-grade concentrate and the middlings (with a combined grade of 17% Ni, 3% Cu, 1% Co) will go to Sudbury. The copper concentrate will be sold to smelters around the world.

In 2011 when Inco’s commercial hydromet facility is operating in Newfoundland, Voisey’s Bay will begin to produce just one nickel concentrate (>20% Ni and 1% Co) plus the copper concentrate.

Potable water for the camp will come from two wells. Process water will come from the tailings basin using a reclaim barge. A water treatment plant will treat site waste water. At the port, a stormwater runoff collection system and sedimentation pond will ensure that no concentrate spills into the bay.

The country rock in the Voisey’s Bay area has very little neutralization potential. VBNC therefore assumes that all rock is potentially acid-generating unless demonstrated otherwise. Rock >0.2% total sulphur is assumed to be acid-generating. All tailings and acid-generating waste will be stored underwater in the Headwater Pond tailings impoundment area 10 km away.

The plan for progressive rehabilitation and closure boils down to restoration, to an acceptable state, of the biological, chemical and physical quality of the environmental resources affected by the development and operation of the mine. The total reclamation cost is estimated at US$57 million. Regulatory approval of the plan is expected by the end of 2004.

Hydromet plant

For years, hydrometallurgy has been used for zinc and copper, but not until the 1990s was an acid-oxidative technology developed to process nickel sulphide concentrates. Finely-ground Ni-Co-Cu conc reacts with oxygen and sulphuric acid in a pressurized vessel to produce an impure solution of nickel, cobalt and copper. This solution is purified in a number of steps ending with separation of the three metals. Electrolysis is then used to make high-purity nickel; copper and cobalt are recovered as byproducts.

There are several advantages of hydromet over pyrometallurgy. A hydromet plant is cheaper to build and cheaper to operate, uses less energy, and recovers more cobalt. It eliminates the airborne emissions–SO2 and dust–associated with smelters. The sulphides are transformed into elemental sulphur, which, together with iron oxide, form the waste solids, along with gypsum and unleached rock. These are neutralized with lime and sent to a disposal facility. All water leaving the plant is treated before release.

There are essentially no PGM values in the Voisey’s Bay ore, a significant point according to Tony Warner who is section head of pyrometallurgy at Inco’s Sheridan Park research facility in Mississauga, Ont. “We couldn’t treat PGM-rich concentrate (such as from Sudbury) with hydrometallurgy because we would not have high enough recoveries.”

Inco is in the midst of a four-stage hydromet R&D program. The chemical processes were first proven in bench-scale laboratory testing. The next stage was to build and operate a 1:10,000-scale mini-pilot plant at the Sheridan Park research facility, to ensure that the steps could be connected into a continuous process. Six campaigns have been completed and there will be one more by mid-2004. Results so far have been very gratifying. The mini-plant has achieved recoveries of 76% for nickel and cobalt, and has shown flexibility, according to du Toit.

The third stage will be to construct a 1:100-scale demonstration facility at Argentia, Nfld., to allow for fine-tuning and optimization of the process, using actual Voisey’s Bay concentrate. Construction of this facility will begin in mid-2004, and it will operate from July 2006 to 2008. An independent engineering feasibility study will look at the results.

If the demo facility is successful, a commercial hydromet plant will be built in Newfoundland. If not, then a commercial nickel refinery will be built in Newfoundland to treat nickel matte using the Sumitomo process. VBNC will inform the provincial government of its decision by mid-November 2008, and the plant will be constructed from 2009 to the end of 2011.

Economic contribution

Voisey’s Bay will have a major impact. Over the 30-year life of the project, some Cdn$11 billion will be contributed to the province’s GDP.

Construction at the Voisey’s Bay site in Labrador will generate about 1,700 person-years of employment from 2003 to 2006. During the open pit phase (2006-19), the mine and concentrator operation will employ about 400 people on 12-hour shifts, on a rotation of two weeks in/two weeks out. This number will double if mining moves underground, in which case the mine life will stretch to about 2032.

Design, engineering and construction of the demonstration facility in Argentia will generate about 300 person-years of employment, and the plant is expected to employ more than 150 people f
rom 2006 to 2008. Construction of the commercial plant will generate about 3,000 person-years of employment from 2009 to 2011; its operation will require about 400 workers starting in 2012.

As part of its development agreement VBNC has committed to certain principles for employment and procurement in the province. The company will give first consideration to qualified members of the Innu Nation and Labrador Inuit Association, and then to other residents of Labrador for jobs at the Voisey’s Bay site. All construction tradespeople at Voisey’s Bay and Argentia will be required to be members of unions. There are other specific agreements with the Inuit and Innu people (see page 13).

By the end of January 2004, Cdn$464 million of the contracts and purchasing for Phase One had been awarded, 90% of which went to companies from Newfoundland and Labrador, many with aboriginal ownership. The largest single contract to date is a three-year, Cdn$140-million contract with IKC/Borealis for civil, earthworks and concrete work for the entire Labrador site. IKC/Borealis is a joint venture of Peter Kiewit Canada Ltd. with partner companies Innu Development Ltd. Partnership, Labrador Construction Ltd., H.J. O’Connell Ltd. and Torngait Services Ltd.

A complete listing of construction program tenders and awarded contracts with detailed information on each package is available at the VBNC web site, www.vbnc.com.

Inco’s nickel resources (Dec. 31, 2003)

	Million	Ni (%)	Cu (%)	Co (%)	Pt, Pd & Au
	tonnes				(g/tonne)
Voisey’s Bay (sulphide)
Proven & probable reserves	30	2.85	1.68	0.14	–
Indicated mineral resources	54	1.53	0.70	0.09	–
Inferred mineral resources	16	1.6	0.80	0.10	–
Other Inco operations (proven and probable reserves)
Ontario (sulphide)	187	1.27	1.41	0.04	1.96
Manitoba (sulphide)	34	2.19	0.15	–	–
PT Inco* (laterite)	107	1.81	–	–	–
Goro laterite project	57	1.52	–	0.12	–

* The PT Inco operation in Indonesia is 59%-owned by Inco.

Agreements with aboriginal groups

The Voisey’s Bay property is in an area subject to recognized aboriginal land claims. Inco reached impacts and benefits agreements (IBAs) with the Inuit of Labrador (represented by the Labrador Inuit Association, “LIA”) and the Innu of Labrador (represented by Innu Nation) in late June 2002.

The confidential IBAs with the two groups provide for payments by VBNC over the life of the project; programs related to training, employment and business opportunities; and the two groups participating in environmental and other programs relating to the project.

VBNC managing director Phil du Toit sees the construction period as “a perfect opportunity to develop a pool of trained and skilled people from whom we can recruit a permanent workforce once operations begin.” Three hundred aboriginal people received various training in 2003, including pre-employment and entry-level skills development.

VBNC exceeded its employment and business opportunity targets in 2003. More than 90% of the workforce at the mine and concentrator construction site were from the province, and 40% of them were aboriginal.

Development agreement with province

Inco’s protracted negotiation with the government of Newfoundland and Labrador was one of the more sensational aspects of the Voisey’s Bay story.

In mid-1998, the company proposed to provincial officials a 20,000-tonne/day open pit mine and mill, with concentrate to be treated by Inco in Ontario and Manitoba. The company would develop processing facilities in Newfoundland/Labrador if and when they were economically feasible. The government turned this down in July 1998 and suspended negotiations.

The parties discussed a revised plan in 1999, but the company refused to unconditionally guarantee that processing facilities would be built in the province. There were no further discussions until June 2001.

Confidential negotiations carried on until June 11, 2002, when the government and company announced a non-binding statement of principles, which was signed as a definitive agreement on Oct. 7, 2002. The terms include development of:

a mine and concentrator at Voisey’s Bay;

hydromet R&D;

an industrial and employment benefits program; and

a timetable.

The key point is downstream processing. Inco must build and operate a demonstration facility in the province to test hydromet technology on Voisey’s Bay concentrate. The company cannot ship any nickel/cobalt concentrates from Voisey’s Bay until the demo facility is ready to operate (July 2006).

The results will determine what kind of commercial plant will be built by the end of 2011: hydromet or a conventional refinery. The commercial hydromet plant would treat all the Voisey’s Bay nickel concentrate. Alternatively, the refinery would treat enough nickel (in matte) to produce at least 25,000 tonnes of finished nickel products annually.

In either scenario, before the mine closes, Inco must start to ship into the province replacement concentrate (or matte) for further processing, containing nickel and cobalt equivalent to the amount that was shipped out of the province from 2006 to 2011.

A final provision is that VBNC will spend Cdn$10 million on the construction and another Cdn$10 million for the operation of the Inco Innovation Centre at Memorial University in St. John’s. The centre will address specific issues related to the Voisey’s Bay project and to Inco’s hydromet facilities. For example, more efficient extractive metallurgical processes will be investigated. So too will new intelligent systems, better materials, and better ways of minimizing and disposing of waste.

In a late February 2004 interview, the Honourable Ed Byrne, Minister of Mines & Energy for Newfoundland and Labrador, described the relationship of his recently-elected government with Inco: “There’s an agreement in place that was signed with the former government that spells out the relationship in a very clear way. We have individuals within the department who are continuously in talks with people of the Voisey’s Bay nickel project in terms of administration and implementing and monitoring of that agreement.”

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