TORONTO (miningweekly.com) – TSX-listed FNX Mining could temporarily halt some or all of its mining operations in Canada's Sudbury Basin later this year, after larger rival Vale Inco announced it will close its own mines and processing facilities for eight weeks, starting from June 1.

FNX has an offtake agreement with Vale Inco, which processes and markets all of the firm's ore production, and so Vale's announcement on Thursday will naturally affect FNX's production too.

FNX is considering various options, including continuing production at current levels and stockpiling the ore for processing when Vale Inco resumes operations, temporarily suspending some or all production and starting up just before Vale lifts its suspension.

It is also exploring the possibility of sending ore to other production facilities.

But, at the end of the day, the situation is “definitely manageable”, FNX spokesperson Dave Constable said on Friday.

“Production is not really the key issue, any production this year is probably going to be around breakeven anyway," he said in a telephone interview.

The Vale Inco shut down will follow a three-week suspension in May for scheduled maintenance, which means that processing operations will be halted for 11 weeks altogether, as the company responds to weak demand for its nickel.

Vale spokesperson Cory McPhee said on Thursday that there were no plans to extend the shutdown in Sudbury beyond July 27, but that the company would “continue to monitor the market and will take action as necessary”.

Like its larger rivals in nickel-rich Sudbury, Vale Inco and Xstrata Nickel, FNX has been knocked by lower nickel prices and demand, and has cut back sharply on spending in a move to conserve cash and improve margins.

Nickel traded above $22/lb in 2007 but has since fallen sharply, to around $5,58/lb, after slowing global economic activity dampened demand for the metal, which is used to make stainless steel.

LEVACK FOOTWALL, PODOLSKY

FNX has already stopped nickel-ore mining from its Levack and McCreedy West mines and cut more than 300 jobs, but is still mining higher-margin copper and precious-metal rich areas at McCreedy, Levack and the new Podolsky mine.

But Constable emphasised that, regardless of how it responds to the Vale shutdown, the company will continue as planned with development of its high-grade copper/nickel/precious metal Levack footwall deposit, which is scheduled to start production in 2010.

Planned underground development and detailed definition drilling at the Podolsky mine will also continue, he said.

"We are going to make sure we take care of spending, take care of our balance sheet, get the Levack footwall deposit into production on schedule, and keep developing Podolsky."

FNX ended 2008 with about C$130-million in cash and no debt.

The company said in February it expected to ship 679 000 t of ore from its Sudbury operations, yielding 3,7-million pounds of payable nickel, 35,2-million pounds of payable copper and 58 000 oz of payable platinum, palladium and gold.

FNX also has an agreement to sell half the gold, platinum and palladium metal produced from its mines to gold-stream firm Gold Wheaton, and the Vale Inco shutdown would likely mean that some precious metals that Gold Wheaton was expecting this year would probably be pushed into 2010, Constable said.

Shares in FNX fell 5,5% on Friday, to C$6,00 apiece by 12:29 in Toronto.