The company is busy doing a prefeasiblity study at Dumont, which it touts as potentially the fourth-biggest nickel sulphide mine in the world, with completion pencilled in for September.

“In the fourth quarter we’ll be out in the market looking for that minimum of C$60-million for the feasibility study, and potentially going up to the $120-million range,” Mitchelson told Mining Weekly Online. The company had previously said in its prospectus that it aimed to place orders for long lead items in mid-2012.

The extra funds would go towards ordering mining equipment such as trucks as, as well as mills.

As commodity prices have ticked higher to hit record levels, mining companies are again beginning to worry about future supplies of equipment vital to extracting their products, such as large trucks and tyres, and crushing equipment.

Before the 2008 crash, supplies of these items were hard to come by, and there were reports of trucks being delivered without tyres.

Royal Nickel, which is run by former Vale Inco (now simply Vale) bosses, brought the Dumont nickel project to the market in December with a Toronto listing.

The stock has gained 33% from its listing price of C$1,80 a share to trade at $2,41 on Friday.

Mitchelson, who used to be in charge of strategy, business planning and brownfields exploration at Vale Inco, said that his team’s focus since the listing has been on working on the prefeasibility study, setting up community engagement programmes, and hiring contractors.

“It’s getting a little tough to find some of the contractors; the market is heating up these days.”

NICKEL MARKET

The Dumont project, located in the Abitibi mining camp in Quebec, was scheduled to come into production in 2015.

This was a time when Mitchelso said there would be very few other projects starting to produce, while demand would continue to grow.

“Beyond this current suite of projects, because nickel fell so far out of favour in 2008/9 nobody was doing anything,” he said.

There was deficit in the nickel market last year, which caused the price of the metal used to make stainless steel to outperform even copper, gaining 40% in 2010.

“The supply side is going to be an issue,” said Mitchelson.

“Maybe not in the next two to three years, but certainly in three to five years it is going to be a big issue.”

NICKEL PIG IRON

Mitchelson went on to say that Chinese production of nickel pig-iron (NPI) had been a blessing in disguise for the industry.

Many of these companies, which produce NPI as a substitute for pure nickel, are so-called swing producers.

This means that they only start making their product when nickel prices are high, which prevents a spike in prices. Similarly, when prices are lower, the higher-cost Chinese NPI producers switch off their furnaces, which prevents the nickel price from dropping much lower.

“People get afraid of NPI, but I think that it’s a great thing,” Mitchelson said.

ON THE PROWL

While the company would only have its Dumont project into production in 2015, Royal Nickel was keen on buying producing assets.

Mitchelson singled out copper and platinum group metals as potential target commodities.

“We’re actively engaging in discussions,” he said, adding that metal prices had driven up valuations meaning that Royal Nickel would have to be “patient and prudent”.

The company aimed to become a large Canadian mining company to fill the void left by the takeovers of giants like Inco and Alcan.

Still, Mitchelson added that “there probably will be overtures for takeovers” of Royal Nickel itself.

The Toronto-based company would need to raise an estimated C$2,3-billion to build a 100 000 t/day mine, and would most likely sell a 30% to 40% stake to a strategic partner and finance most of the remainder with debt, he said.