November 1, 2011 / 12:53 PM / in 6 years

UPDATE 1-Royal Nickel sees promise in Quebec nickel project

* Project could produce over 95 mln lbs of nickel annually

* Study shows benefit of a staged development approach

* Development of the project remains on schedule

* Alternate processing method under consideration

* Royal Nickel shares have plunged this year (Adds details on project, share price move; Figures in U.S. dollars, unless noted)

By Euan Rocha

TORONTO, Nov 1 (Reuters) - Royal Nickel Corp RNX.TO said on Tuesday a preliminary study on its Dumont Nickel project in western Quebec has demonstrated the project is economically viable.

The Toronto-based exploration company said the project, on average, would produce more than 95 million pounds (44,000 tonnes) of nickel annually during its first 19 years of production. It could produce nearly 60 million pounds annually over the next 12 years.

Royal Nickel, managed by a team of former Inco executives, said the preliminary study suggests development of the project in a phased manner. Initially it sees a 50,000 tonne-a-day operation costing about $1.1 billion. By the fifth year, the operation’s capacity could be doubled at an additional cost of $700 million.

“This study clearly demonstrates the benefits of the staged development approach with a much simpler, lower cost and lower risk flowsheet,” Chief Executive Tyler Mitchelson said in a statement.

“When combined with the project’s outstanding location next to existing infrastructure ... this pre-feasibility study provides a very strong foundation on which to advance this exceptional project,” said Mitchelson, who worked with Vale SA VALE5.SA for a spell after the Brazilian mining giant bought out Inco, a Canadian base metal miner, in 2006.

Royal Nickel said the development of the project remains on schedule. It intends to obtain the necessary permits by the end of 2013 and begin production by the end of 2015 at the site, located about 60 kilometers (37 miles) northeast of Rouyn-Noranda.

The company is examining the feasibility of alternate method of processing nickel concentrate produced from Dumont. Used in many parts of Asia, the process would result in a ferro-nickel product tailor-made for the stainless steel industry. It could potentially also improve metal recoveries and help reduce treatment and refining costs.

The ability to produce high-grade ferro-nickel would boost Asian interest in the project and open up more partnership opportunities for Royal Nickel.

Royal Nickel will develop Dumont as a conventional open pit mine, using conventional drilling, blasting, loading and truck haulage.

Shares of Royal Nickel, which touched an all-time-high of C$2.99 a share in early January, have taken a pounding since then. Growing concerns about the global economy have hit shares of both base metal mining and exploration companies across the globe.

Royal Nickel’s shares have fallen nearly 70 percent this year and closed at C$0.86, Monday on the Toronto Stock Exchange. ($1= $0.99 Canadian) (Reporting by Euan Rocha; Editing by Frank McGurty)

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