New Nickel Boss

By Ritchie Gage

Its not every executive who is so happy about his new posting that he buys a plane. But Mike Sylvestre, the new boss of INCOs Thompson, Manitoba operation did just that.

After a four year stint in the jungles of Indonesia running an INCO open pit mine, he returned to Canada with his wife and their two young children ages four and two and a half. Both children grew up in Indonesia and have never seen snow. Sylvestre says he can hardly wait until winter comes. Its going to be a blast.

He also prepared for living in the land of lakes and forests. When I knew I was coming to Thompson, I realized a boyhood dream by buying a Cessna float plane. I bought it from a Saskatchewan farmer even before I arrived in July. I use it a lot. Ive had my kids up. They love it.

The 50-year-old Canadian mining engineer has logged 31 years with INCO - his entire career in fact - and knows well the ebbs and flows of the nickel price cycle.

He takes over the Thompson mining operation at an interesting time in the companys history. At the moment, nickel prices are buoyant and INCO is an acquisition target of the giant Brazilian nickel company, CVR. Sylvestre says, We live in a world of acquisitions and consolidations. It was just a matter of time until this happened.

Under Canadian law, public companies are obligated to entertain any offers so that shareholders may assess them. Shareholders rejected a bid from US giant Phelps Dodge and INCO is focusing on the cash bid by CVR.

INCO is not used to all the attention as it has functioned for years in its own world. The Thompson operation goes about its business in an orderly fashion, as most mining operations do, turning tons of nickel ore into finished product -earning gross sales of about $1 billion annually. INCOs nickel ore has a ratio of 1.9 per cent nickel, which, compared to a possible high of three per cent, is a decent grade.

The operation employs about 1,500 workers. The two distinct mines - Thompson and Birchtree - both feed a mill, then a smelter. The nickel is then electro-refined in another operation. After processing, it is sent directly to the customer. The nickel is shipped in rounds or slabs to be used for a variety of products such as car wheels, lighting fixtures, computer components, and other stainless steel products including kitchen cutlery.

Sylvestre says Thompsons nickel is more pure than other producers and that the slabs are thicker. Customers like thicker slabs because they are utilized better in the cells - lasting longer in the process, he says. All metals are at unprecedented prices due to the world demand - especially in China and India. But Sylvestre puts a caveat on his remark. Nickel prices go high and then eventually come back down, so you have to position yourself to earn an acceptable return on the product at all times, he says.

Mining has changed during recent years. In the early days, miners at both Sudbury and Thompson had to haul huge timbers underground to brace the walls while hand held drills were used to strip the ore. Now mechanization takes care of much of the ore recovery, both manned and unmanned.

Sylvestre says the company employs many earth science people to assess the ground where the drilling will be done. There is no legislation which directs underground support systems, but the science of bracing tunnels means using steel cable and bolts knitted together. If required well even use a layer of concrete. Its all engineering, he says.

To many, the INCO operation has been as routine as can be, except for the odd labour disagreement. But over all, there has been labour peace and Sylvestre says that the work force is reliable and there is respect between the company and the union.

Workhorse While gold is in the news with a new mine operating in Bissett, owned by San Gold Resources, nickel is still the workhorse metal in Manitoba and INCO Limited is the provinces star producer.

Many people have spent their entire lives working for the company, raising their families on the doorstep of some of the most pristine fishing and hunting territory in the Canadian Shield.

The mine, which started in 1961, was the culmination of a 10-year aggressive search for a nickel deposit by American-owned International Nickel Company Ltd. The company undertook an unprecedented exploration program of 725 kilometres of holes drilled into the rock. There is no easier way.

In February 1956, a large deposit was found after initial exploration using airborne detection. An additional six deposits were discovered soon after and this was the beginning of a solid source of decent paying jobs for the Manitoba economy. It also put Thompson on the map worldwide.

The nickel strike created a brand new town - Thompson - named after Dr. John Thompson, a metallurgist who worked to find the nickel. He rose to President and Chief Executive Officer, retiring in 1960.

From that time until now, a steady stream of nickel has created Canadas largest and only nickel producer, which has long since become a Canadian business icon.

Of major concern are the new federal environmental guidelines that seek to greatly reduce the amount of sulphur dioxide - acid rain - a byproduct of refining nickel. INCO is worried that the guidelines are set too low and too fast - resulting in higher costs of extraction making the mines at Thompson and Sudbury uneconomical.

We could take the SO2 out but there is no economical market for it, he says. Collecting it would be a huge net cost to us. We have to find a solution to this. There has to be a different approach to the problem. We hope Mr. Doer will weigh in on the issue.

He is also concerned about hydro rates and has met with the CEO of Manitoba Hydro, Bob Brennan, regarding a possible rise in the rates.

He says the Thompson operation has about 15 years of ore left and that anything affecting its production margins are of concern. We will continue to drill to find new sources of nickel but it will eventually run out, he says.

Without mining, Thompsons future will definitely be affected. However, Sylvestre says that the town is a hub of the north and will continue to be.