Mirabela Nickel plans to pursue new strategic and funding options after announcing multiple setbacks at its Brazilian mining operations, including the loss of one of its customers and a likely increase in capital expenditure.
The company downgraded its production outlook for the second time in the past three months.
It also disclosed it is operating at a cash loss, with an increase in unit cash costs to $US6.26 per pound for the September quarter to date, and a fall in the realised nickel price to $US5.97/lb.
The company noted the “increased risk to its business” as a result of the challenges disclosed today.
“While the impact of these events are difficult to quantify, should one or more of the risks crystallise, the cumulative effect on the company’s cash flow could be significant, particularly in the context of the company’s debt repayment obligations,” Mirabela said in a statement.
“Given this heightened risk profile, and the fact that nickel prices are forecast to trade below the company’s break-even position in 2014, Mirabela intends to continue exploring opportunities for new strategic, financing and off-take alternatives.”
Today’s update included news that one of its two customers, Vorantim Metais Niquel, intends to close its smelting facilities from November due to the weak market conditions.
Vorantim considers that the concentrate sales agreement with Mirabela will terminate at the end of November; the contract was expected to run to the end of 2014.
Mirabela also noted a “challenging short-term production outlook, with the open pit mine being out of sequence post the nitrate supply disruption”.
As a result, the company’s full-year nickel production for 2013 may be less than 17,000 tonnes of nickel in concentrate.
In July, Mirabela reduced its full-year production outlook to a range of 17,000 to 18,500t, down from a range of 22,000t to 24,000t.
Mirabela said nickel prices were trading below its cash flow break-even position after overheads, financing and capital costs.
Mirabela also noted a recent change in market analyst opinions, with analysts now considering the possibility of continued weak nickel prices for 2014.
The company’s shares fell by 3.5 cents to just 2.6 cents per share today.
