Nickel drives record profits

Record prices for nickel, copper and zinc have underpinned bumper profit reports this month, with global mining giant BHP Billiton Ltd leading the charge with a 28.4 per cent increase in net profit to $US13.4 billion ($A16.7 billion) for the year to June 2007.

Perth-based nickel miners Minara Resources Ltd, Jubilee Mines NL, Independence Group NL and Mincor Resources Ltd also reported strongly improved results, as did base metals producer Kagara Zinc Ltd.

By comparison, oil and gas producer Woodside Petroleum Ltd achieved a relatively modest lift in half-year profit, with its reported net profit up 16.3 per cent and its underlying profit up 10.6 per cent.

BHP’s nickel division (stainless steel materials) was the star contributor to its higher profit. The nickel business achieved a 310 per cent increase in underlying earnings before interest and tax (EBIT) to $US3.7 billion.

BHP’s fast-growing iron ore business achieved a modest 7.9 per cent increase in underlying EBIT to $US2.5 billion following big profit gains in 2005-06.

BHP has a positive outlook on commodity prices generally.

“Over time we expect commodity prices to move towards long run marginal costs of supply,” the company said in its profit report.

“However given strong demand and supply side constraints, this is only likely over the medium term and, in the interim, prices are likely to stay high relative to historical levels, albeit with increased volatility.”

Minara had a similar assessment of the nickel market, saying it has entered a period of increased volatility after the increase in nickel prices in the first half of 2007.

“Although the fundamentals of the nickel market remain sound, volatility in the price will continue for some time,” the company said.

The nickel price peaked briefly at more than $US50,000 per tonne in May and has since tumbled to about $US25,725/t.