Factors in Developing a Mineral Deposit

DR. C. C. GOLDRING: The heart of many a Canadian child has swelled with pride when he learned in school that Canada leads the world in the production of nickel. Many a Canadian adult, too, has been thrilled to realize the profit he has made from a wise investment in the nickel industry. It is our privilege, today, to have as our guest speaker Dr. John Thompson who has been associated with the International Nickel Company since 1906.

Dr. Thompson was born in the state of Maine and attended the School of Mines, Columbia University, receiving a B.S. degree in 1903 and Ph.D. degree in 1906. He has since been awarded honorary degrees by Columbia University and also by Queen's. In his long association with INCO, Dr. Thompson has served in a variety of capacities. He became a Director of the Canadian company in 1931, a Vice-President in 1932, President in 1949, and Chairman of the Board in 1951. He is connected with several other business enterprises, being a Director of seven companies, most of which are concerned with metals. He is a Trustee or member of the Advisory Committee of several other organizations associated with mining and metals.

The Empire Club of Canada welcomes to our city this distinguished citizen of the United States who will address us on the topic, "Factors in Developing a Mineral Deposit".

DR. THOMPSON: When one is invited to address an organization of the nature of The Empire Club of Canada, with a membership encompassing so many diversified spheres of activity, it is always difficult to select a topic of sufficient general interest to the audience. I have listened to many talks such as the one I am giving today, and it has always seemed to me that the speaker did best if he selected a subject in which he himself was vitally interested, hoping that some of his enthusiasm would be carried over to his listeners. Accordingly, I selected as a title, "Factors in Developing a Mineral Deposit", feeling that there are certain factors which are vital to the success of such an undertaking, but which are often overlooked by mining companies. The essence of this thought can be expressed in these few words: A mineral deposit has no value unless the ore can be mined, refined and the resulting metal sold at a profit. In saying this, I wish to emphasize the word "sold".

When I entered the mining business some fifty years ago, the average mining company felt it had fulfilled its function when it produced finished metals in good quality and either offered them for sale on established open markets, such as the London Metal exchange, or put them on the shelf and waited for customers to come around. With the commercial development of new metals, there had to be a complete change of view on this matter. Since nickel is one of these metals, perhaps the earliest element to fit into this category, I shall use it throughout as an illustration.

Back in 1883, when the Canadian Pacific was being cut through Northern Ontario, a sulphide ore deposit was discovered. Thinking that it was a rich copper deposit, the original discoverers were filled with enthusiasm. The shipment of the first material to the Orford Copper Company, later to become part of the International Nickel Company, rapidly brought to light that, although there was copper in the ore, there was something else, soon determined to be nickel, which completely destroyed the value of the ore as a copper ore, and left the Sudbury Basin as simply an enormous opportunity for its owners to go broke trying to work it. The Sudbury Basin at that moment was valueless.

Not only was there no established market for this nickel, but there was no known satisfactory method which would separate the nickel from the copper, thus enabling the operators to produce the valuable copper. They first tried the old method of chemical solution. They then, by one of those combinations of hard work, some technical knowledge and luck, discovered that by melting the matte with a mixture of coke and sodium sulphate, they could produce a metal which separated on cooling into two layers, the one being rich in copper, the other rich in nickel. By this means was discovered the so-called Orford Process, which for some fifty years remained probably the most efficient, economical and rapid method of separating the nickel and copper in copper-nickel ores.

However, our predecessors in the nickel business had courage, vision and determination, or what perhaps might be more accurately described as plain mule-headed stubbornness, and they proceeded to go out and find where there were markets for nickel beyond the then limited uses in nickel silver and eletroplating. Fortunately for them, it had been determined that nickel gave certain properties to steel which made the resulting steel useful in armor plate, big guns and projectiles. Thus the original impetus to the nickel business was given by these uses.

Some twenty years later the automobile, with its use of nickel steel, created a then small but growing market for the metal. But up to the First World War, nickel remained largely an armament metal, and the world statistics of consumption were overwhelmingly affected according to whether the various countries of the world were engaged in the construction of naval fleets. This continued until after the end of the First World War, during which time the consumption of nickel reached a then all-time high.

The ending of the war, plus the Washington Naval Conference, destroyed this market-destroyed it to such an extent that for eighteen months there was no nickel ore raised in the Sudbury Basin and the Sudbury Basin became almost as valueless as it had been in the early 80's when the presence of nickel indicated that the Basin had no future as a copper mining centre.

Thus in 1922 the nickel industry was faced with a desperate problem - we had what we then knew were large and potentially very valuable deposits. We had the belief that a market could be developed. We were satisfied that we had an obligation to convert the nickel business from an armament specially to a world-wide peacetime industry and, at that time, we started to do it.

Fortunately, however, Monel metal had been discovered in 1905, and in 1906 we had embarked on a program of learning the properties of this high-nickel copper alloy, working out its fabrication, and then, with full confidence in our ability to create a market, started on its commercial development. During those fifteen to sixteen years, we had spent a great deal of time, a great deal of effort, and a great deal of money in unprofitably pursuing this development. But while these years were unprofitable financially, they were later to pay large dividends, because during this time we were able to experiment and work out many of the things which had to be discovered and mastered, before we were able to successfully make a market for Monel, or be even able to produce the metal at all. And, more important than these, during this time, we were able to build up a group of men well skilled in all the different arts of making the metal, selling the metal, finding and working with customers, advertising and so forth-the foundation of our later nickel development.

Naturally, Monel metal was first in our thoughts. We knew how to manufacture it but we had no facilities of our own to do so. We had learned through experience that we could not successfully develop a market depending on others to do our rolling and fabrication for us. We had a market so small that it apparently did not justify the building of a rolling mill, but the Management and Directors had sufficient courage to determine on an expenditure of over $3,500,000 at a time when the Company's resources in quick cash and securities were only about two-thirds of that amount, feeling confident that given a mill which would enable us to produce the forms of rolled products needed, we could go out and establish a profitable market for them. Simultaneously with this, we pushed ahead on a similar activity designed to remove nickel from the armament class or a material used in comparatively small amounts in nickel silver, plating, coinage and nickel steel into a metal of universal application. Starting from this basis, and with, as I said before, the Sudbury Basin shut down for eighteen months, we proceeded to build up a rounded organization covering mining, smelting, refining, research, technical field service and, most importantly, a wide distribution system to dispose of our various products, with the result that in 1929 we sold more nickel than had ever been sold in the world before in any one year, even at the peak of the First World War. For that year we estimated how much of this nickel went into armament or war purposes. There were naturally some differences of opinion as to where the line should be drawn between war and non-war uses and, on that basis, the estimates differ. The lowest estimate was one-half of one percent -the highest estimate was five percent - and the nickel business had become an industry rather than a war-time specialty.

From that point, we have continued to expand the uses for nickel so that today the world is short of this product because we again have a re-armament and stockpile demand superimposed on the peace-time demands. This has required our doing many things. I would like to take them up, not in their order of importance, because there is no order of importance. Each one of them is an essential link in the chain. Perhaps in orderly progression they might be considered as follows:

The first is the exploration for new ore deposits. The old traditional mining method was to find a deposit, mine it as quickly as possible in the most profitable manner possible and, when the mines were exhausted, move on, leaving a ghost town, of which there are many on this Continent. But we are not in the business of making ghost towns; we are in the business of running a continuing industry. The management of a modern mining company has a number of obligations. First they have the primary obligation to the country in which the mines are located. Nature has put a valuable material underground and that must be handled in a way which satisfies the national interests. Secondly, management has an obligation to its employees to see that they can have the opportunity to continue to work profitably in this industry throughout their lives and their children's lives. Thirdly, it certainly has an obligation to the customers to see that they receive the materials they want in the forms they want and that they can buy them in places located to suit their needs. Finally, we have the sometimes apparently forgotten group, the stockholders who are risking their money in the enterprise and who, if the enterprise is to continue, must be satisfied with the results of the stewardship. At times these interests apparently come in conflict. That they actually come in conflict, I cannot agree. There are, however, facts which must be recognized, which through the interbalance of forces control many of a company's actions.

Taking the question of exploration, every time you mine a pound of ore, you have removed something for good and all and, to the extent of that one pound, a mine or a mining district has moved towards its final extinction. But there are many people whose lives and fortunes are invested in having a continuing operation. From the local standpoint, it is vital, from the national standpoint, it is essential that the lives of mines be conserved over a long, regular period; that towns not become ghost towns; that the mines continue to pay the wages and taxes, support the schools and hospitals, and do all those things which we all regard as one of the functions of a modern mining company. But when you hunt for ore, you have to hunt for ore where it is located, and with a large developing market, ore is only valuable if it is found in large quantities.

Naturally, we prefer to find ore somewhere in Canada and have extended our search to all parts of the country. But with the potentialities of the nickel market, it is necessary to extend the search further to other places where geology makes it possible that nickel deposits may be found. As a result, we must extend our exploration to all parts of the world where we feel that nickel is geologically possible and there should be a recognition that if a large, profitable nickel deposit is discovered, somewhere outside of Canada, Canadians, I feel, should be pleased with this discovery, not feeling that it is a competitor of Canadian mines, but feeling that it is an insurance that, as the world's demand for metals continues to grow, this additional source of supply only buttresses and supports the continuing life of the established Canadian deposits and of the towns and industries which are dependent on them.

But after the ore has been found, many steps must be taken before the metal is in final form for the market. This is of course inseparable from any metallurgical development and, since the emphasis of my talk today is essentially on the final step of this operation - the marketing - suffice it to say that our processes, following the Orford Process, which I described a short time ago, have changed, modified and improved while our methods of mining, which started originally as open pit quarrying, have now developed to five different kinds of underground mining, ranging through blast hole mining, shrinkage stopes, square set mining and panel caving.

These improvements and developments of processes go on continuously. This is essential for two reasons, the first a defensive reason, that is: costs must be reduced if we are to be able, over a period of time, to meet the general increase in cost which inflation continues to bring us. Second, constructively, so as to make available and profitable the lower grade ores and those ores which today are not profitable, but which, with new and improved processes can often be worked even more profitably than the older richer deposits. Thirdly, since the nickel deposits are not only nickel deposits, but also deposits containing copper and precious metals, especially the platinum metals, it is necessary to work out processes which will recover every possible ounce of value from each carload which is mined. So that, at present, having started originally as a company which produced nickel and copper, we now produce a variety of some fourteen metals and elements, thus both profitably working the ore and generally adding to the mineral resources of Canada.

But to do this takes both long periods of time and large amounts of money. As an example, we just started to produce iron ore from the first unit of an iron ore recovery plant near Copper Cliff. The first shipments have already been made to Canadian steel works. Iron has, of course, been since the beginning, a recognized element in the Sudbury ores. Various efforts have been made in the past to convert it into some sort of commercial form, but these have always been unsuccessful. Our present endeavour which has now resulted in an operation delivering high-grade iron ore - ore of the highest grade on this Continent - started almost exactly ten years ago. During those ten years we have had a constant experience of steady experimentation and also of the steady spending of money and at the end of that period, while we have produced a new, very valuable product from Canadian ores, we have also involved ourselves in a large capital expenditure, so that the first unit of this plant has cost some $19,000,000 with other units still to be built. However, the result has been an addition to Canada's wealth and an additional source of income to the Nickel Company.

As I said a moment ago, all of these new developments called for large investments of capital. For example, since the beginning of our major programme of mine development and expansion during World War If, the Company's capital expenditures have aggregated $220,000,000, and we are now spending an average of about $23,000,000 a year. Capital cost of construction of new plants has now reached the point where a plant, such as the U.S. Government plant in Cuba rated at 50,000,000 pounds per year capacity, will cost, when it is complete, probably a total of $90,000,000.

All of these expenditures are essential if we are to continue to do our share in supplying the world with nickel and if we are to keep our costs reasonable in view of the inflation which has taken place with the resulting great rises in the cost of labour, power, supplies, etc.

Having given this rapid survey, let us turn to the really important point which I would like to make, and that is the necessity of proper distribution and the making of the market. Naturally, each metal company has a sales department and our Company has them in various parts of the world wherever the principal markets are located. But this selling activity requires almost immediate extension; either to sub-sales departments located in different parts of the country and in different countries, or perhaps equally importantly to distributors or agents who sell - the products of the Company together with the products of other companies. For, as we have learned, it is only by selling a combination of metals that one of these distributors is able to support a proper activity.

The first step, therefore, is to find distributors strategically located in the various cities of the various countries in which one intends to do business. The most essential thing is to find distributors with the proper attitude of mind, for distribution of a new metal is not a simple matter of putting it on the shelf and selling it to the customers who comes along. It requires a large complicated mechanism, involving not only serving the current customers, but searching for the new customers who will build an increasing market. And let me say that the essence of this thought is contained in these words which have become a sort of by-word around the Nickel Company: The size of the world's nickel market is only limited by the imagination and the amount of work, energy and skill which the producers of nickel are prepared to put into building it. Thus in order to have proper distributors, they must have men who have the same ideal in mind, who are not satisfied with today's sales, but are constantly reaching out, not only for new customers in old fields, although they do that as a matter of course, but also for customers in new undeveloped fields. This calls for men who have the imagination to invent fields for themselves, who have the energy to take an idea and convert it into an established use. Naturally, to find these men takes a good deal of hunting and then a good deal of training.

The Nickel Company has been especially happy in this. It started fifty years ago to sell its products, especially in the United States, in England and on the Continent - there was no Canadian business to speak of in those days - through the efforts of young men inspired with the same idea of creating a market rather than battling for a share of an old market which others created. As a result, we have distributors scattered throughout the world, old friends, men brought up thoroughly imbued with the spirit of constantly expanding the uses of nickel in those places where it is economically practical and possible. And when I say economically practical and possible, I mean where it is profitable to the user, because the only foundation of a proper development for a metal is to find those people who can profit by its use and then, by supplying their needs, establish a continuing business. Through them we have a set of offices and warehouses, of distributors located throughout the world who are engaged in selling our products to the trade. Certain of the new uses are developed by these distributors from experience gained from contact with various potential users. But back of that must lie a determined effort of our own to develop new alloys, to develop new products, to understand the conditions under which our products are used, to determine which of our products is best adapted for a particular purpose and finally to make the knowledge which we have obtained, through the laboratory, through experience in the trade, through studying records of scientific societies and engineering societies, freely and readily available to potential users. That in itself is an activity of its own.

In this connection, we operate 13 research laboratories in Canada, the United States and the United Kingdom. We also support outside research activities in these and other countries. But after the research work has been completed, the essential thing is to put into practical use what has been learned. Our first step in this direction was taken in 1926 when we established two of what are known today as Centres of Information on Nickel, one in France and one in the United Kingdom. Today, there are nickel information bureaux in eight industrial countries, supplemented by 13 technical field offices. These offices are staffed by engineers and scientists who are familiar with the background and needs of the industries in their countries. They have wide acquaintance with and enjoy the confidence of the engineering staffs of the organizations by whom they are regularly consulted. At an annual aggregate expense of between $1,250,000 and $1,500,000, these men search out new uses for nickel, determine the product to be used and then make the results of their efforts available to the trade.

In each of the industrial countries of the world we have built up mailing lists carefully, so that we can reach promptly various businessmen-various purchasing agents, various engineers-in all the different industries, and so that a piece of technical information, developed, say, in England can be rapidly distributed to those people in Canada, the United States, Germany, France and Belgium who are in the best position to use it. These information bureaux also have trained technical men who call on the trade to give technical information, who answer technical questions over the telephone and distribute specialized literature on a variety of subjects.

As an example of this work, I can only say that each year we publish in six different languages, 14 technical periodicals with a total circulation of over 3,500,000. In addition, 358 technical publications are currently available. Most of these are in the form of bulletins and reprints of technical papers. Last year we had about 50,000 requests for 170,000 items. In a single year our Development and Research personnel presented 27 papers and delivered 167 lectures before technical audiences throughout the world. Extensive contact is maintained with the public through advertising, motion pictures and radio. Our technical service to industry, I believe, is the most comprehensive and extensive given by any company for any metal.

It is now thirty years since this service first started. During this time almost one generation of technical men has passed through these offices and these companies, and the mechanism, the technique, of doing this work has been developed from year to year and is being developed still further for service in the future. For until somebody is profitably using nickel, there is no point in all the large investment of money and time in finding it and getting it out of the ground.

But to learn about the properties of nickel and its compounds and alloys is useless unless, as I have said, the interested potential customer is able to buy the material he needs in the form he needs from conveniently located sources, of supply. To this end, we have distributors established in 72 cities in major industrial centres throughout the world.

And now we come to one of the most important considerations in developing the market. This is the establishing of prices. Because of the small number of nickel producers, it has been assumed that competition was at a minimum. Actually, nickel competes with many things. It is not direct competition of the nickel of one producer with the nickel of other producers which is disturbing, but the competition of nickel-containing products with all the other available substitute materials. In one place, nickel products compete with plastics or wood, in another case with the bronze and brasses, in still others with aluminium. In order for some companies to change to a nickel-containing product from a product containing no nickel, it is often necessary for them to make expensive and complicated changes in machinery and process. In many cases, they must invest large amounts of capital in order to make the changes. Beyond this, they have to advertise more extensively, more expensively and, in many instances, they have to risk their whole company's name on, the use of a nickel alloy. They cannot afford to do this if they are subject to the whims of rapid changes in nickel prices and it is only by establishing a price and by sticking to it long enough to convince them that this is an established policy, that we can induce them to make the expensive changes which are necessary and to take the commercial risks. The stability of price, which has been a feature of the nickel industry, is based on this firm belief that only by such a policy could the nickel market be properly expanded. Inflation has forced the price up to its present level. Whether it will force it further, we do not know. What the results of economic and technological changes will be, we do not know. For many years, technological advance, plus the savings in overhead, due to increase in production were sufficient to enable the price to be kept steady. I can only re-state that a steady price, recognized as reasonable both by producers and consumers, is essential to the enlargement of the nickel market.

Using nickel as an example, I have sketched those practices which we believe are necessary to the development of the market of any metal. Canada is now going through one of the great stages of its metal development; new mineral deposits are being found in all parts of the country. Many of these are deposits of metals for which the market is at present very limited. To find the market for these newer quantities and especially for these newer metals, I believe that it will be necessary to go through the steps which I have outlined to make a market for the product. I believe that the same energy and vision which have led to the discovery of deposits will lead to the making of markets. We have here, in Canada, great resources. Among the greatest of these are the energy and determination of its people. With sufficient imagination and enough hard work, I feel that markets can be created for all of Canada's rapidly expanding metal production.