Prices, uncertain marketplace create test of competitiveness.

The coming months will be filled with hurdles for the two major employers in Sudbury Region.

"It will be a challenging year," admits James Ashcroft, president of Inco Ltd.'s Ontario division.

Ashcroft predicts that global economic conditions will put the nickel giant's competitive abilities to the test during the balance of 1992.

"We have to continue to reduce our costs and improve our bottom line," he stresses. "The smart ones in the business are going to find out who the lowest-cost producer in the world is and target their costs."

Market conditions have already forced the mining companies to reduce their combined workforce by almost 1,300 people through early retirement.

"We're in a survival mode," admits Ashcroft. "In fact all of North America is in a survival mode."

Neither Ashcroft or Richard Laine, director of human resources and public affairs for Falconbridge, expect a dramatic increase in the price of nickel this year.

"The economic forecasts for 1992 are very shaky," Laine notes. "We're hoping that there is going to be a recovery."

Ashcroft admits that the picture is unclear.

"First the recovery was supposed to begin in the second quarter of 1991, then it was the third quarter and then by the end of the year," he recalls. "The fact is that people just don't know what is going to happen."

POOR PRICES

By the end of 1991 the price of nickel had dropped to a level where neither mining company was making money.

The price had increased enough by early January for Inco to make about 20 cents per pound. However, Falconbridge Ltd. was still losing about $1 per pound.

Ashcroft expects that the price of nickel will remain at its current level for the remainder of the year. He adds that the impending closure of a British steel plant will likely keep prices down.

"That (the plant closing) is going to put about 6,000 people out of work. It's hard to be optimistic about price increases when you hear news like that," he says.

"You have to look for other suppliers to have problems getting their goods to market in order to have any prices increases."

POLITICAL CHANGES

The end of Cold War tensions between the U.S. and the former Soviet Union could also affect the prices of nickel, platinum and other strategic metals.

There is speculation that the United States will reduce its strategic metals inventory in an effort to raise cash.

The U.S. government is planning to reduce its stockpile of tin, copper and aluminum by 43 per cent, and is considering a reduction of its lead, silver and nickel inventories as well.

One factor which kept nickel prices down last year was the fear that the former Soviet Union would "dump" its nickel on the market at reduced prices in order to raise badly needed capital.

While the fear persists, Laine points out that there are doubts that the Commonwealth of Independent States can deliver the goods.

"One variable is whether they are capable of meeting delivery times and the quality standards they have promised," he says.

"There are indications that their infrastructure may not be maintained adequately over the next few years."

EXPLORATION

Despite the current economic situation, both Inco and Falconbridge are proceeding with exploration and development projects which could come on line at a time when prices are rebounding.

One project which is expected to have a positive impact on Falconbridge's future is already paying dividends for the firm.

The company's Craig Mine, located north of Sudbury, is expected to be working at close to full capacity by the end of next year. By 1994 the high-grade deposit is expected to provide up to 70 per cent of Falconbridge's nickel output from the Sudbury basin.

However, Laine indicates that ore from the mine is already being processed.

"We're bringing the ore up through the Onaping Mine," he explains. "There is still a lot of development work to be done, but the mine is the next major producer, and we're hoping the high-grade ore will improve our production costs."

Exploration work at Falconbridge's Lindsley Mine is scheduled to continue for at least the next six months. Preliminary exploration work at the company's properties in the Wahnapitae Anomoly area is also expected to continue, although Laine admits that there are several problems associated with the properties.

"We're attempting to localize some mineralization and see if it represents minerals of any real value - if there is enough to call it an ore body," Laine explains. "The disadvantage is that the zones are very deep and it has to be a high-grade ore body for it to be worth bringing into production."

Laine says it is unlikely that the properties will be brought into production before the turn of the century.

TWO DISCOVERIES

Inco recently announced the discovery of a pair of high-grade ore bodies near the rim of the Sudbury basin.

One deposit, known as Victor, contains a minimum of 4.6 million tons of ore with grades of 1.5 to 2.6 per cent nickel and 5.1 to 7.4 per cent copper.

In addition, the deposit, located almost seven miles north of the town of Falconbridge, contains between .2 and .5 ounces per ton of platinum and palladium.

A drilling program is expected to be completed early this year.

The second deposit has been discovered between Inco's Levack and McCreedy East mines. The deposit is estimated at about 4.6 million tons with grades of .8 per cent nickel and 11 per cent copper.