PERTH, Australia, Sept. 26, 2013 /CNW/ - Mirabela Nickel Limited (Mirabela or the Company) (ASX: MBN, TSX: MNB) wishes to provide a company and operational
update.
Mirabela has received notification from one of its two customers,
Votorantim Metais Niquel S.A. (Votorantim), that Votorantim intends to close their smelting facilities from
November 2013 due to the adverse nickel market conditions. Votorantim
considers that the concentrate sales agreement with Mirabela will
terminate at the end of November 2013. The contract was expected to run
until the end of 2014. The Company is taking legal advice in relation
to its contract with Votorantim and its position in relation to its
debt funding agreements.
Mirabela has 100% of its concentrate deliveries committed until the end
of 2013 through the remaining deliveries to Votorantim and deliveries
to its other customer, Norilsk Nickel, subject to Mirabela's ability to
export through the port of Ilheus. The Company has also commenced
discussions with Norilsk Nickel and other potential customers regarding
2014.
Mirabela also wishes to provide the following operational update to the
end of August 2013 (unaudited numbers):
-
Production for the quarter to date of 2,653 tonnes of nickel in
concentrate (year to date: 10,884 tonnes)
-
Sales for the quarter to date of 2,076 tonnes of nickel in concentrate
(year to date: 10,150 tonnes)
-
Unit cash costs of US$6.26/lb for the quarter to date (year to date:
US$5.62/lb)
-
Capital expenditure for the quarter to date, including capitalised
mining costs, of US$4.5M (year to date: US$23.3M)
-
Realised nickel price of US$5.97/lb for the quarter to date (year to
date: US$7.07/lb)
-
Cash on hand and on deposit of US$79.7 million at the end of August 2013
(US$108 million as at 30 June).
The Company notes the challenging short-term production outlook with the
open pit mine being out of sequence post the nitrate supply disruption.
This may result in the Company achieving full year contained nickel
production of less than 17,000 tonnes, the lower end of Mirabela's
current production guidance. Mirabela expects to be in a position to
update its 2013 guidance for production, unit cash cost and capital
expenditure by the time it releases its third quarter results later in
October.
The Company has also commenced its planning cycle for 2014 and notes the
following items:
-
The Company expects to carry out a substantial tailing storage facility
wall lift next year; and
-
The Company expects to increase mine material movement to approximately
50 million tonnes per annum next year, in line with the long term mine
plan, which will increase the capitalised mining costs.
Whilst the Company is unable at this early stage in its planning cycle
to quantify the capital budget for 2014, which will include the items
above, it is now evident that the capital expenditure requirements for
2014 may be materially higher than 2013.
The Company also notes the continuing challenging nickel market
conditions with LME nickel prices continuing to trade below the
Company's cashflow break-even position after overheads, financing and
capital costs. Mirabela also notes the recent change in market analyst
opinions regarding the likelihood of a recovery of nickel prices in
early 2014 on the back of an expected ban of Indonesian nickel ore
exports to China, with the market analysts now considering the
possibility of continued weak nickel prices for 2014.
The Company notes the increased risk to its business as a result of the
challenges outlined above. 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 cashflow could be significant,
particularly in the context of the Company's debt repayment
obligations.
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. The Company will update the market
when it is able to further quantify the potential impact of the risks
to its business, as well as in respect of its ongoing process to
identify strategic and funding solutions.
DISCLAIMER - FORWARD LOOKING INFORMATION
Certain information in this document, including all statements that are
not historical facts, constitutes forward-looking information within
the meaning of applicable Canadian & Australian securities laws. Such
forward-looking information includes, but is not limited to,
information which reflects management's expectations regarding
Mirabela's results of operations.
In making and providing the forward-looking information included in this
document, the Company has made numerous assumptions. These assumptions
include among other things: (i) assumptions about the price of nickel
and other base metals; (ii) assumptions about operating costs and
expenditures; (iii) assumptions about future production and recovery;
(iv) that the supply and demand for nickel develops as expected; (v)
that there is no unanticipated fluctuation in interest rates and
foreign exchange rates; and (vi) that there is no material
deterioration in general economic conditions. Although management
believes that the assumptions made and the expectations represented by
such information are reasonable, there can be no assurance that the
forward-looking information will prove to be accurate. By its nature,
forward-looking information is based on assumptions and involves known
and unknown risks, uncertainties and other factors that may cause the
Company's actual results, performance or achievements, or results, to
be materially different from future results, performance or
achievements expressed or implied by such forward-looking information.
Such risks, uncertainties and other factors include among other things
the following: (i) decreases in the price of nickel and copper; (ii)
the risk that the Company will continue to have negative operating cash
flow; (iii) the risk that additional financing will not be obtained as
and when required; (iv) material increases in operating costs; (v)
adverse fluctuations in foreign exchange rates; (vi) the risk that
concentrate produced will not meet certain minimum specifications;
(vii) production estimates may not be accurate; (viii) environmental
risks and changes in environmental legislation; (ix) and failure to
comply with restrictions and covenants under the Unsecured Senior
Notes.
The Company's MD&A and the Annual Information Form contain information
on risks, uncertainties and other factors relating to the
forward-looking information. Although the Company has attempted to
identify factors that would cause actual actions, events or results to
differ materially from those disclosed in the forward-looking
information, there may be other factors that cause actual results,
performances, achievements or events not to be anticipated, estimated
or intended. Also, many of the factors are beyond the Company's
control. Accordingly, readers should not place undue reliance on
forward-looking information. All forward-looking information disclosed
in this document is qualified by this cautionary statement.
SOURCE Mirabela Nickel Ltd.
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