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:: FNX Arranges Financing, Moves Ore Processing to Xstrata Nickel
Faced with declining metal sales due to the on-going strike at Vale Inco's Sudbury nickel operations, the 45% reduction of its own workforce, and changes in global commodity markets, Toronto-based FNX Mining announced Tuesday it had arranged for Cdn$125.5 million (US$114m) in bought deal financing.
Since the end of last year FNX decreased its capex by Cdn$70 million, laid off 300 employees and suspended all nickel production. Because of an agreement with Vale Inco, FNX is to ship and sell all of the ore it produces to Vale Inco in Sudbury for processing. However, Vale decided to extend a maintenance shutdown to 11 weeks this year.
Meanwhile, Vale Inco's unions have gone on strike, which compounded FNX's processing concerns. FNX then entered into an agreement with neighboring Xstrata Nickel to process up to 150,000 tonnes of FNX stockpiled ore at the Strathcona mill in Sudbury.
FNX stopped ore shipment to Vale operations at the end of May and stockpiled their ore at their Podolsky and McCreedy West mines. If Vale's facilities continue to be closed for an extended period, FNX's stockpiled ore will be processed at either Vale Inco facilities when operations resume or possibly at Xstrata's Strathcona Mill, if the Xstrata Nickel processing agreement is extended.
FNX said it may "selectively mine contract nickel ore where it is cash flow positive and economically viable."
During the second quarter the company decided to focus on mining copper-precious metal ores rather than nickel ores. Copper sales in the second quarter were 7.9 million, an 8% increase over the same quarter of last year. Precious metals sales (including gold and PGM) totaled 16,532 ounces during the second quarter, up from 11,582 ounces during the same period a year ago. Nickel sales dropped a substantial 2 million pounds to 1.5 million pounds in the second quarter of this year as a result of the suspension of production of Levack nickel contact ores.
The company forecast that metal sales this year will be lower as a result of the suspension of the Levack nickel contact ore production and a planned reduction at McCreedy West.
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