Mirabela Nickel Limited - Quarterly activity report for the period ended 30
PERTH, Australia, Oct. 31, 2013 /CNW/ - Mirabela Nickel Limited (Mirabela or
the Company) (ASX: MBN) announces its unaudited third quarter results for the
period ended 30 September 2013.
-- Production for the quarter of 3,962 tonnes of nickel in
concentrate (Q2 2013: 4,080 tonnes).
-- Sales for the quarter of 2,786 tonnes of nickel in concentrate
(Q2 2013: 4,168 tonnes).
-- Unit cash costs of US$6.19/lb for the quarter (Q2 2013:
-- Year to date production of 12,193 tonnes of nickel in
concentrate at an average unit cash cost of US$5.71/lb.
-- Average mined nickel grade of 0.41% for the quarter (Q2 2013:
0.50%) and total mining material movement of 9.2 million tonnes
(Q2 2013: 10.4 million tonnes).
-- Processing plant throughput of 1.7 million tonnes (Q2 2013: 1.7
-- Average processing plant nickel recovery of 53% (Q2 2013: 51%)
and average nickel feed grade of 0.43% (Q2 2013: 0.47%) for the
-- Cash on hand and on deposit of US$70 million at quarter end (Q2
2013: US$108 million).
Mirabela's third quarter was challenging with the Brazil-wide nitrate supply
disruption during July 2013 severely restricting mining operations during July
and resulting in the mine being out of sequence for the duration of the
quarter. Since the end of the quarter, the Company's operations have also been
adversely impacted by the destabilising effect of the announcement by one of
Mirabela's two customers, Votorantim Metais Niquel S.A. (Votorantim), relating
to the planned closure of its smelting facilities, and subsequent events.
The Company also notes the ongoing challenging nickel market conditions with
the LME nickel prices continuing to trade below the Company's cashflow
break-even position after overheads, financing and capital costs. In
addition, there has been a 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 exports to China, with the market analysts
now considering the possibility of continued weak nickel prices for 2014.
Due to these factors, the Company is currently assessing operating options to
minimise short-term and mid-term cash outflows. The Company does not expect to
meet the low end of its production guidance (17,000 tonnes) and is not in a
position to provide further guidance due to the uncertainty of its current
In addition to the items discussed above, the Company notes that it has
identified other impairment indicators and is in the process of performing an
impairment test on the recoverability of its assets that could result in a
non-cash write down of the carrying value of the assets. Further detail on
the impairment assessment will be provided once the analysis has been
Mirabela's strong safety performance continued with no lost time injuries
during the quarter. The Company's twelve month moving average Lost Time Injury
Frequency Rate closed the quarter at 0.57. Mirabela continues to target
further improvements to this strong safety record through ongoing safety
training and safety improvement programmes, including critical risk
inspections on thirteen key safety areas within the business.
Three Three months % change
months Year to Date
30 Jun 2013 (unfavourable)
30 Sep 2013
Total Tonnes 9,221,753 10,387,040 (11) 28,107,075
Ore Mined Tonnes 1,720,711 1,661,192 4 4,546,464
Nickel % 0.41 0.50 (17) 0.46
Total Ore Tonnes 1,753,329 1,695,559 2 5,010,851
Nickel % 0.43 0.47 (8) 0.46
Copper % 0.09 0.10 (9) 0.10
Cobalt % 0.01 0.02 (4) 0.02
Nickel % 53 51 3 53
Copper % 71 65 9 69
Cobalt % 27 27 2 28
Nickel in DMT 3,962 4,080 (3) 12,193
Copper in DMT 1,137 1,125 1 3,431
Cobalt in DMT 71 71 - 214
Nickel in DMT 2,786 4,168 (33) 10,860
Copper in DMT 805 1,143 (30) 3,067
Cobalt in DMT 51 71 (28) 192
((1))Includes sales volume adjustments upon finalisation of assays.
Total material movement for the quarter was 9.2 million tonnes of material
moved for 1.7 million tonnes of ore. Material movement was below expectations
for the quarter mainly due to the nitrate supply disruption during July. The
restricted nitrate resulted in limited mining for the month with the
preferential mining of ore ahead of waste production. Extra contract loading
capacity has been organised to increase the waste mining with a view to
returning to the planned mine sequence.
Material movement was also adversely affected by poor mobile equipment
availability, particularly the Company's front end loaders which are
maintained by the Company's OEM endorsed service provider. The Company
continues to explore alternatives to the current maintenance arrangements.
U&M, Mirabela's mining service provider, also had issues with its loading
fleet availability during the quarter.
Mine grades of 0.41% were lower than the previous quarter driven by the mine
being out of sequence for the duration of the quarter and poor mined nickel
grades. The improvement in ore quality expected during the third quarter
with mining resuming in the Southern end of the pit has not been realised with
disappointing nickel grades mined for the quarter. However, the improved MgO
levels positively affected the plant performance during the quarter. The
average mined nickel grade for the year (0.46%) is approximately 10% below
expectations. The Company's grade control RC drilling programme, which
commenced during September, is expected to improve mining dilution. The
Company is currently completing its annual independent review of Reserves and
During the quarter 1.7 million tonnes of ore was milled, at an average head
grade of 0.43% nickel and achieving an average recovery of 53%. Ore quality
limitations were the most significant constraint on nickel production levels.
Recovery performance remained in line with expectations with recovery
improving from the prior quarter due to lower MgO levels in the mine feed.
The marginally lower than target processing plant throughput was primarily
driven by power supply disruption in Northeast Brazil, ongoing remediation
work on the primary crusher and unplanned maintenance work on the SAG mill.
Further remediation work on the Primary Crusher is scheduled for January 2014
over a twelve day period. This work will include the redressing of concrete,
removal and replacement of the inner chamber wear plates, removal and
redressing of old welding seams to remove stress concentration points and the
replacement of the eccentric bush housing which has developed a crack.
During the quarter Mirabela produced 3,962 tonnes of contained nickel in
concentrate, 1,137 tonnes of contained copper in concentrate, and 71 tonnes of
contained cobalt in concentrate. A total of 2,786 tonnes of nickel in
concentrate was sold to Votorantim with no shipments to Norilsk Nickel during
The planned Norilsk Nickel shipment was delayed due to new storage and
shipping requirements at the Ilheus port imposed by the Brazilian authorities.
The Company continues to work with the Brazilian regulators to ensure that its
Norilsk shipments from the Ilheus port can continue by way of bagged nickel
concentrate or an alternate port facility. The Company is also assessing the
possibility of transporting its concentrate in half height containers.
Exploration & Studies
Exploration activity for the quarter continued to focus on tenement
Unit Cash Costs
Three Three % change
months months Year to
30 Sep 30 Jun
Payable Nickel Lbs 7,773,887 8,005,416 (3) 23,924,029
Mining Cost US$/lb 3.66 3.44 (6) 3.21
Processing Costs US$/lb 1.59 1.69 6 1.65
Administration US$/lb 0.53 0.65 18 0.58
Subtotal US$/lb 5.78 5.78 - 5.44
Transport/Shipping US$/lb 0.05 0.16 69 0.11
By-Product Credit( US$/lb (0.52) (1.42) (63) (1.04)
Smelter Charges US$/lb 0.88 1.32 33 1.20
Subtotal US$/lb 0.41 0.06 (583) 0.27
C1 Unit Cash Cost US$/lb 6.19 5.84 6 5.71
Unit Royalty Cost US$/lb 0.23 0.33 30 0.31
Realised Nickel US$/lb 5.94 7.27 (18) 7.03
Realised Copper US$/lb 2.54 2.99 (15) 2.97
Realised Cobalt US$/lb 13.73 10.83 27 11.07
Average US$/Real 2.29 2.07 11 2.12
((1)) Average payability of 89%
((2)) Including prior period QP adjustments
Mirabela recorded a C1 unit cash cost for the third quarter of US$6.19/lb,
taking the average unit cash cost for the nine months ended 30 September 2013
to US$5.71/lb. Unit cash costs for the third quarter were higher than the
second quarter predominately due to lower production levels.
Unit processing and administration costs per payable pound improved on the
previous quarter primarily due to various cost saving initiatives and an
improved exchange rate. Unit mining costs per payable pound were higher in
the third quarter primarily due to lower capitalised mining costs, lower
payable nickel production, higher explosive costs (due to higher nitrate
prices), higher usage of fuel and tires (due to greater average haulage
distance) and preventative maintenance. The improved exchange rate helped to
soften these impacts. Selling costs were also higher in the third quarter
mostly as a result of no PGM (platinum group metals) by-product credits for
Cash and Debt
Mirabela closed the third quarter with cash on hand and on deposit of US$69.77
million. The decrease in cash on hand from 30 June 2013 (US$108.12 million)
was driven by a combination of factors including negative cash flow from
operations, primarily due to a lower level of sales to customers, overall
lower nickel prices and the finalisation of nickel sales that occurred in
October 2012 and January 2013 at an average finalisation price of US7.75/lb
compared to an average provisional price of US7.85/lb; capital expenditure of
US$6.90 million; the repayment of US$2.04 million relating to the Caterpillar
finance lease facility and US$0.74 million for the Atlas Copco finance lease
facility; and the interest payment of US$1.60 million on the working capital
facility held with Banco Bradesco S.A. (Bradesco).
The Company's cash position continues to reduce as a result of the LME nickel
prices continuing to trade below the Company's cashflow breakeven position
after overheads, financing and capital costs.The Company's cash on hand
has reduced by US$73.24 million since the commencement of the 2013 financial
year (1 January 2013).
The cash on hand as at 29 October 2013 is US$53.66 million and concentrate
inventory is approximately 12,500 dry metric tonne.
The Company has the following debt structures currently in place:
-- The Company has on issue approximately US$395 million of 8.75%
senior unsecured notes due 2018 (Notes) - bi-annual interest of
US$17.28 million due 15 October 2013 was not paid on that date
and the Company is currently utilising the cure period of 30
days while it continues to assess its funding options; and
-- The Company's subsidiary, Mirabela Mineração do Brasil Ltda,
a) a US$50 million facility with Bradesco which is secured
by the Company's off-take contracts with Votorantim and Norilsk
Nickel (Bradesco Facility) - a repayment of US$16.67 million of
principle is due at the end of January 2014;
b) a US$55 million master funding and lease agreement with
Caterpillar Financial Services Corporation. Year to date the
outstanding balance is US$11.23 million; and
c) a US$5.2 million financing facility with Atlas Copco
Customer Finance, with an outstanding balance year to date of
US$ 2.23 million.
As previously announced, on 26 September 2013, Votorantim provided notice that
its concentrate sales agreement (Sales Agreement) with Mirabela would
terminate at the end of November 2013, in conjunction with Votorantim's
announcement of intention to close its smelting facilities. As required,
Mirabela provided notice of this purported termination of the Sales Agreement
to Bradesco. Following receipt of legal advice in respect of the purported
termination of the Sales Agreement by Votorantim, discussions were held with
Votorantim and Votorantim subsequently confirmed to the Company in writing
that its purported termination of the Sales Agreement was invalid, that the
Sales Agreement remains on foot, and that it intends to comply with its
obligations under the Sales Agreement until the end of 2014. Notwithstanding
this, the Company only expects Votorantim to procure a small amount of nickel
concentrate from Mirabela in 2014. As this will result in a diminished
security position to Bradesco, and potentially trigger an event of default
through a material adverse change clause in the Bradesco Facility, Mirabela
has agreed to grant Bradesco security over the receivables pursuant to its
off-take agreement with Norilsk Nickel.
The Company confirms that it did not make payment of interest on 15 October
2013, pursuant to the terms of the indenture relating to the Notes. The
non-payment of interest pursuant to the indenture will only constitute an
event of default if it continues for 30 days.
As at 30 September 2013 the Company's issued share capital consisted of
876,801,147 ordinary shares. A balance of 400,000 unlisted options and
5,091,810 performance rights were outstanding.
During the quarter a total of 3,750,000 options previously issued at an
exercise price of A$3.00(US$2.80) were unexercised and as a result have
No options were exercised during the quarter.
The Company de-listed from the Canadian Stock Exchange (TSX) on 4 October
2013. The decision to de-list was made due to the limited trading volume of
Mirabela's shares on the TSX over a sustained period of time and as a result
it is not expected that maintaining the listing will deliver significant
future value for the Company and its Canadian Shareholders.
SOURCE Mirabela Nickel Ltd.
Mirabela Nickel Limited Telephone: +61 8 9324 1177 email@example.com
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