Falconbridge expands Raglan nickel mine in northern Quebec

Falconbridge expands Raglan nickel mine in northern Quebec

Thursday, August 10th 2006

Nickel producer Falconbridge Ltd. (TSX:FAL) plans to expand its Raglan mine in northern Quebec with an investment of more than $500 million over the next several years, the company announced Wednesday.

The expansion will create about 50 new jobs as the miner launches two key studies to develop new reserves to replace ore mined since the mine opened in 1997 and boost metal output. Falconbridge said the first study will focus on new reserves and will cost about $240 million over six years.

The second study will look at a 30 per cent expansion in nickel ore production to 1.3 million tonnes a year from one million as early as 2009. That study will cost about $250 million and create about 50 new jobs while raising the annual royalties Falconbridge pays to local Inuit communities.

In a related development, Falconbridge also announced the start of major renovations to its Deception Bay loading dock at a cost of $50 million to handle the planned increase in nickel production.

“These studies will enable the Raglan Mine to expand production while maintaining the flow of benefits to local Inuit communities, and also respecting the environment,” Ian Pearce, the Toronto company’s chief operating officer, told a news conference at Raglan.

Quebec Premier Jean Charest and Natural Resources Minister Pierre Corbeil also attended the expansion announcement.

“Falconbridge has strong roots in the immense Abitibi-Temiscamingue region of Quebec, through its predecessor company Noranda,” Pearce said. “In recent years, Quebec has demonstrated its unequivocal support for the mining sector and is today one of the world’s most attractive jurisdictions for our industry.”

The Falconbridge nickel mining camp at Raglan is made up of three underground mines, one open-pit mine, as well as a processing mill, all connected by road to a landing strip at Donaldson and to harbour terminals at Deception Bay. Ore from the mine is crushed, ground and processed into nickel-copper concentrate at the Raglan plant.

Falconbridge is one of the world’s biggest nickel and copper producers, with 14,500 workers around the world.

Late Tuesday, Falconbridge’s board of directors recommended that shareholders tender to a takeover bid by Swiss mining giant Xstrata (LSE:XTA), signalling an end to a months-long takeover battle among Canada’s mining giants.

Xstrata, which already owns 24.5 per cent of Falconbridge, is offering $63.25 Cdn a share in cash, including a special dividend, for the rest. That offer expires Aug. 14.

Falconbridge had initially spurned Xstrata’s offer, forming an alliance with fellow Canadian mining company Inco (TSX:N) and U.S. copper miner Phelps Dodge Corp. (NYSE:PD) with plans to create the country’s biggest nickel company. However, those plans dissolved after shareholders failed to support the merger.

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