Canadian Arrow Mines: The Nickel Price
(6 pages of text)
In 2016, Canadian Arrow Mines Limited (CRO) had a promising nickel property, the Kenbridge deposit, located 70 kilometres southeast of Kenora, Ontario. The spot had been the site of significant exploration in the past. Further exploration by CRO had indicated that it could be profitable. CRO had spent close to CA$10 million on redevelopment, and needed a further $3 million for the final feasibility study before going into full operation. In 2007, nickel hit a high of $27 per pound, but by 2009, prices had dipped to under $8 per pound, which severely curtailed the firm’s ability to raise the final $3 million. CRO turned its attention to other projects to raise money in the hope of a recovery, but the trend had been negative until mid-2016. To save the property, CRO had laid off all of its employees and reduced expenses to the minimum required. With a small recovery evident, CRO management wondered if CRO should hang on further and wait for nickel prices to rise enough to support the final feasibility study. The team wanted to know what nickel price was required to run a profitable operation. Were there any indicators about which direction this price would take in the future?
The case is written for a graduate course in strategy, entrepreneurship, finance, or corporate social responsibility. It illustrates the complex nature of the mining business, and the interplay of internal and external environmental factors. The case shows students the steps required to develop a mining property, the long odds of finding and developing an economically viable resource, and the actual costs of running a mining operation. The case will help students to
- understand internal factors in the successful development of a junior mining property;
- identify external factors that affect mining development;
- place corporate social responsibility processes and outcomes in the context of resource development companies;
- define and overcome barriers to development in mining; and
- recognize the small chance of success that most mining properties have.
Mining, Quarrying, and Oil and Gas Extraction
Canada, Small, 2016
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