Skye sees prospects in Guatemalan nickel project

Skye sees prospects in Guatemalan nickel project

By Wendy Stuek, Mining Reporter

Tuesday, March 8, 2005

Toronto -- Unlike countries such as Finland, Ghana and Peru, Guatemala does not have an official presence at this year's Prospectors and Developers Association of Canada convention.

But the Central American country is drawing significant mining interest, including that of the Canadian government, which helped organize a national mining forum in Guatemala in December.

That interest is being read as a good sign by Skye Resources Inc., a Vancouver company that aims to resurrect a Guatemalan nickel project formerly run by Inco Ltd.

"We have had good support from the Canadian embassy," Skye vice-president Colin McKenzie said yesterday at the association convention in Toronto. "They have been very active on our behalf and on behalf of Canadian mining in general in the country."

At this point, Guatemala does not have a major base or precious metals mine, although both types of projects are on the horizon.

Last December, Skye acquired a 70-per-cent interest in Exploraciones y Explotaciones Mineras Izabal SA (Exmibal) from Inco Ltd. The Guatemalan government owns the remaining 30 per cent.

Exmibal operated a mine and smelter in Guatemala in the late 1970s, but by 1980 low nickel prices and high energy costs had made the project a money-loser. Inco put the project on care and maintenance.

With nickel prices at considerably higher levels and new projects in short supply, Skye wants to blow the dust off and resume operations.

Last month, the company began a study that will look at refurbishing and expanding the existing plant to produce 45 million pounds of nickel a year. Further studies will look at boosting that capacity.

Mr. McKenzie, who worked at Inco and helped cut the Skye deal before joining the junior company last year, said the plant and surroundings are in very good shape, considering they were mothballed for more than two decades.

A skeleton team of about 30 people and an annual budget of about $400,000 kept the project from falling into disrepair, he said.

Inco, which is building the Voisey's Bay project in Labrador and Goro in New Caledonia in the South Pacific, described its stake in Exmibal as a non-core asset.

Part of the challenge of bringing Exmibal on stream will involve dealing with community relations in Guatemala. Although the current government has voiced support for mining, non-governmental organizations have already raised concerns about the impact of big mining projects on the environment and local communities. Guatemala endured 30 years of civil war before a peace agreement in 1996.

Mr. McKenzie said Skye has hired a local mine manager and community workers to talk to nearby residents about the potential restart of the project. Obtaining community support for the project will be essential for it to proceed, he said.

Glamis Gold Ltd., which is developing the Marlin gold project in Guatemala, has already been the focus of anti-mining protests.

In January, villagers blocked a road that was being used to ship a piece of equipment to the Marlin site, about 150 kilometres away. The government sent police to clear the road. At least one person was killed in the resulting melee.

That led to calls for Glamis to stop developing its project, which has obtained about $45-million in financing from an arm of the World Bank.

Yesterday, Glamis vice-president Chuck Jeannes, in Toronto to attend the convention, said Glamis remains committed to its project in Guatemala and still retains significant community backing for the Marlin mine.