Quadra FNX Mining Limited and Xstrata Nickel have signed a term sheet to utilize the Craig mine shaft and related underground infrastructure to further develop and operate the Levack mine including the Morrison deposit. All amounts are in US dollars.
Quadra FNX expects that the use of Xstrata Nickel's Craig infrastructure will significantly improve the operational flexibility of the Morrison deposit and provide additional mining and drill access in the lower portions of this high grade ore body. The additional development and improved efficiency is expected to have a positive impact on production.
The key terms:
1. Quadra FNX gains access to the Craig shaft and mine infrastructure for the life of the Levack mine and Morrison deposit
2. Quadra FNX will operate the Craig shaft and underground infrastructure but will not undertake mining from Xstrata Nickel's Craig property. In the event Xstrata Nickel exercises its option to resume operational management of the Craig shaft, it will continue to provide access to Quadra FNX to hoist up to 450,000 tonnes per annum of material from the Levack mine and Morrison deposit
3. Quadra FNX will pay Xstrata Nickel:
I. USD 10 million during the first year of operation
II. USD 2 million per annum lease fee plus a sliding scale payment per tonne of ore hoisted via the Craig shaft
This arrangement is subject to the finalization of a definitive agreement that provides for these and other terms within 60 days.
The approximately 5,000 foot Craig shaft is connected to Quadra FNX's Morrison deposit by an access drift on the 4000 level that represents a second access point to its operations, the first being a ramp from the Levack 2 shaft on 2650 Level.
The key benefits:
1. Expanded hoisting and haulage capacity at the Morrison deposit allowing the potential for higher throughput and production going forward
2. Improved operating flexibility, underground infrastructure, ventilation and power distribution to the lower parts of the Morrison deposit
3. Accelerated underground access, development of definition drilling platforms and mine development in the lower portion of the Morrison deposit
4. Immediate cost savings related to the cessation of ongoing rehabilitation work on the existing Levack 2 shaft
5. Significant improvement in drill access which will facilitate mineral resource delineation in the lower portion of the Morrison deposit
6. Development of alternative diamond drill platforms which will be used to evaluate additional exploration targets proximal to the Morrison orebody.
The arrangement also enables Xstrata Nickel to retain the operational integrity and productive capacity of the Craig infrastructure which has been in a care and maintenance state since February 2009.
Mr Paul Blythe president & CEO of Quadra FNX Mining said that "The access arrangement with Xstrata Nickel provides mutual benefits to both parties going forward. We will be advancing the implementation plan in order to shift operations from the Levack 2 shaft to the Craig shaft immediately. This will be a significant step forward in the optimization of our high grade Morrison deposit."
