Mincor cautiously restarts Miitel

Mincor Resources says it will restart its Miitel nickel operation, more than a year after it halted production due to the financial crisis, but warns the proposed super profit tax places the mine in a precarious position.

The miner said today it will benefit from a two-year window from Miitel, located in the Kambalda region, before the resource super profit tax is proposed to be implemented in July 2012.

It outlined a case scenario of the potential impact of the proposed tax to Mincor if Miitel was the only mine the company operated.

With the help of external tax advisers, Mincor said various case models used a nickel price of $US9 a pound and an exchange rate of US90 cents.

"In essence, the modelling shows that if the mine was developed as a completely new project under the new tax regime, and without the benefit of past expenditures, the total tax rate would be a deeply unattractive 57%," Mincor said in a statement.

"If the benefit of past expenditures were included, this total tax rate would reduce to a still unattractive 55%.

"This compares with the 41% tax rate (income tax plus royalties) that the project would attract under existing legislation, including the benefit of past expenditures.

"However, the modelling also shows that it is advantageous to put Miitel back into production immediately, as the project will benefit from the two-year window before the new tax is fully implemented and will derive some further benefit from transitional arrangements associated with the introduction of the new tax.

"Under this scenario the total tax rate is modelled at 38%."

Mincor also noted the way in which the super profit tax changes under changing commodity price assumptions.

"The model shows that under the proposed new system the tax rate of around 55-57% remains unchanged at high, low and middling nickel price assumptions," the company said.

"Under current tax legislation the tax rate rises under low price assumptions and declines under high price assumptions.

"This means that, under the Resource Super Tax, the federal government will effectively subsidise marginal or sub-economic mines during periods of lower commodity prices.

"This has profound implications for economic efficiency, resource investment, and Australia's status as a market economy."

Restarting the Miitel mine is expected to cost less than $1 million and the ramp-up to full production is due to start in July.

Miitel is forecast to produce between 4,500 tonnes and 5,500t of nickel-in-ore each year during an initial four-year production timeline, however any extensions to the mine life will be in doubt as it would attract the super profit tax if introduced.

Life-of-mine cash costs are about $5.50 to $6 per pound of payable nickel and the restart is expected to create 100 new jobs and inject more than $130 million into the local and state economy over the next four years.

Shares in Mincor climbed one cent to $1.65 at 13:46 AEST.