The northern Manitoba city of Thompson could be home to a new mining mega-development from Vale, which is exploring minerals deep underground.

News of a potential big development is being cautiously welcomed in Thompson, which was devastated by news in 2010 that Vale — the city's largest employer — would shut down its nickel smelter and refinery there by 2015.

Vale is currently testing ore samples in a project area it calls 1-D, about 3,800 to 4,200 feet underground in the company's T-3 mine shaft.

Preliminary testing in 1-D shows a deposit rich in nickel and copper deposits and also containing some cobalt and precious metals.

Vale says it has been mining in 1-D for years, but officials believe now is the time to dig deeper in an largely untapped section of the deposit extending as much as 6,800 feet underground in some places.

According to the company, geologists have been pulling up core samples containing extremely high-grade nickel.

Based on their tests, the geologists believe there are at least 10 million tonnes of nickel present.

"It's very exciting … when you open it up the core boxes and you see this as far as understanding how it got there as a geologist and things like that, but also just what good news it is for the community," said Rob Stewart, the exploration manager with Vale's Thompson operation.

"We're testing in areas that previously weren't tested and we're just showing that we understand that the ore controls enough to be able to extend as we go down, so it is very exciting."

Stewart said based on the samples he has seen, it appears there may be enough nickel deep underground to extend the mine's life by at least 15 to 20 years.

'Awful lot of fear' after 2010 announcement

Nickel has long been the economic driving force in Thompson, which a population of more than 12,800 people.

Vale's announcement on Nov. 17, 2010, about the refinery and smelter closure had an immediate impact on more than 500 people who worked at the processing plant.

Vale T-3 mine shaft

Vale crews work 3,800 feet (about 1,158 metres) underground in the company's T-3 mine shaft in Thompson, Man. (Katie Nicholson/CBC)

 However, its effects were widely felt across the northern city, where Vale has been its largest employer.

Mayor Tim Johnston said he had just returned from Fort McMurray, Alta., and had big plans for diversifying business in Thompson when the bad news came.

"A lot of people had a lot of questions about what was going to take place, what was going to happen. And in any situation like that, there's many scenarios that people play out in their minds, and I think that there was an awful lot of fear about the markets crashing or people boarding up their windows or leaving town," he said.

"You have to remember at that period, we were just at the height of some real economic development and along came the news. And it was like someone switched the light off."

Johnston, along with Vale and other community partners, launched a plan to diversity the local economy, billing it more as a service centre to the North as part of an initiative called the Thompson Economic Diversification Working Group (TEDWG).

Still, the smelter and refinery closure had many worried about the city's future.

Vale looks at options, courts partners

In terms of the potential mega-project, Vale is presently looking at options on how to access the untapped mineral deposit.

One option would be to sink another shaft deep underground, but officials say that would take roughly seven years and cost $1.2 billion.

Vale Thompson core samples

Some of the core samples from the 1-D project area at Vale's mining operations in Thompson, Man. (Katie Nicholson/CBC)

Another option, according to the company, is digging and tunnelling hundreds of kilometres of underground "ramps" into the ore body, a process that would take about three years and cost $350 million.

One factor Vale is considering is the nickel market, which has been soft for a while.

Mark Scott, the company's general manager of mining and milling, says officials are looking for a partner to join them in the Thompson venture.

"What we're looking for is a partner to help invest, inject the cash into this project, so that we can go ahead and develop it at a time where our business, our base metals business within the larger Vale corporation, is challenged with respect to cashflow," Scott said.

Scott said it's generally a good idea in mining to enter into partnerships because it spreads the risk associated with projects.

"Regardless of how strong the financials for the project are, the cash just isn't available within our organization, so we're out looking for some help with that," he said.

In the meantime, Johnston said business interests and potential partners are starting to call Thompson again, and suddenly residents are no longer fearing Vale's announcements.

"Over the last year or so everyone anticipates the next announcement, and I think since 2010 to probably … a year and a half ago, the anticipation of the next announcement was that it would be another negative announcement," he said.

"The shift that I have seen in the last 12 months, let's say, is that the anticipation has shifted to, 'There's a positive announcement coming.'"

Vale says a major announcement is imminent in the next few months.