Sad to read thisIt is indeed sad to read the news that LBE will put Redstone and McWatters on care and maintenance, this means no more revenue, and no more loss due to operation.
Few people saw the significant drop in steel price last year or even 4 months ago. But the market condition changed drastically, as China has reduced steel demand, and so was nickel. BDI index dropped significantly, major steel producer also dropped significantly, major iron ore companies also dropped 80% (for example Consolidated Thompson), and this all affect nickel producers such as LBE.
A significant portion of China's real esate firms collapsed, and the car demand decreased, and all these reduced steel demand. As China is the largest consumer of iron/steel in the world (India is the 2nd), their decrease in demand cut metal (Nickel) price significantly. Down another 50% from the low price several months ago, and down about 70% from last year's price. The cost of poducing nickel is higher than the nickel price now (negative cash flow from operation), and thus LBE must shut down their operation, including the just announced McWatter pre-production. This is indeed sad as Gary and his group have worked very hard on this.
LBE cannot get their financing to continue operation, and need to shut down all mining operation, and need to lay off its worker. Whatever value LBE will have will be the property and mill value, at discount under the current market condition. The current market cap of LBE is about $7M.
Hopefully, by shutting down, this world will have fewer nickel, and nickel price will eventually reflect at least the cost of producing nickel ($7 to $8?), and only when nickel goes up more than that price, LBE has a chance of getting new financing to resume operation.
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Liberty Places Operations on Care and Maintenance10/31/2008 7:27:43 PM - Market Wire
EDMONTON, ALBERTA, Oct 31, 2008 (Marketwire via COMTEX News Network) --
LibertyMines Inc. (TSX:LBE) ("Liberty or the Corporation") announces that inthe wake of the recent downturn in commodities prices and the generaleconomic slow-down, management has determined that it is initiating acare and maintenance program at its Redstone and McWatters mines andthe Redstone nickel concentrator effective immediately.
Asannounced on October 27, 2008, due to the failure of the financingannounced on September 29, 2008, Liberty will be seeking near-termfinancing in order to fund its intended restructuring and interimoperations. It will also seek out partners with which to complete abusiness combination such as an amalgamation, arrangement, take-overbid or other combination for the purposes of financing its growth andoperations.
According to Gary Nash, President and ChiefExecutive Officer of Liberty, "In these difficult financial times, acompany needs to be flexible and creative in order to survive. Libertyis rich in mining assets and is seeking a business combination with apartner who is looking for first class mining assets that can financeour growth and production plans."