Nickel future bright

WITH nickel prices at a three-year high of around $US4.50 a pound, it is all good news for Western Australia’s junior mining producers and explorers that are experiencing record revenues and a positive sentiment in the industry.

Mincor Resources will pay a maiden dividend to shareholders of 1.5 cents fully franked after recording a net profit of $9.1 million.

Although the result was slightly down on the $9.3 million the previous year, revenue was up by 23 per cent to $78.9 million following a rise in production.

Jubilee Mines has reported a net profit of $48.4 million that resulted in a 15 per cent jump in the share price last week on the announcement of the result. On the day the share price closed at $3.74 after touching an all-time high of $3.80 during the day’s trading.

The company’s Cosmos nickel operation near Kambalda generated a revenue of $153.6 million and operating cash flow of $101.8 million.

Canadian-based Lionore Mining reported revenue of $US72.1 million during the second quarter of 2003 – up from $US10.4 million in the corresponding period 12 months earlier.

The company’s WA-based Emily Ann and Maggie Hays nickel projects were significant contributors.

West Perth-based Independent Gold reported a maiden profit (unaudited) of $1.1 million after a strong performance from its Long nickel mine.

MPI mines reported an operating cash flow of $17.2 million for the first half this year, underpinned by operations at Black Swan nickel mine.

There are also a number of companies with developments coming on stream such as Sally Malay, Western Areas and Titan Resources with production of about 6,000 to 8,000 tonnes of nickel per annum expected.

Sally Malay Mines CEO Peter Harold said the Sally Malay mine, which is due to begin production next July, is costing $60 million and is expected to produce 8,000 tonnes of nickel a year.

He said the company is now looking to maximise the return on the Sally Malay project, expand existing projects and would be looking for other opportunities in nickel, other base metals and gold.

“We wouldn’t rule out looking for other nickel products, but would be looking at other base metals and gold projects,” Mr Harold said.

Chamber of Minerals and Energy spokesperson David Parker summed up the coinciding factors that have led to the nickel boom.

“The major changes that the nickel boom can be attributed to include an increase in Chinese demand, a decrease in Russian stockpiles, a lack of new projects globally in terms of new nickel deposits and the curtailment of production at overseas competitor locations,” he said.

“According to chamber sources, we understand this to be the most positive scenario since 1988.

“To address the short-term demand increase, there’s committed new production and expansion at brown field existing operations.

“At a higher [nickel] price, there is a lot of opportunity for the economics of those smaller projects to work.

“Scarcity of new nickel projects should ensure them and the long-term price outlook should hold up.

Mr Parker said there was a revival of regional communities such as Kambalda, which was a positive flow on effect of the nickel boom.

Paterson Ord Minnett analyst Andrew Driscoll said the smaller producers were enjoying high cash flows, while junior explorers were benefiting from positive sentiment in the industry, increased interest from investors and better access to capital raising.

“Producers have enjoyed an increase in commodity prices and explorers are enjoying renewed interest and confidence in the sector,” he said.


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