Battling Mincor turns small profit/div
Mark Mentiplay, 17th Aug 2012
AUG 17 – By major Australian nickel producer Mincor Resources’ own evaluation, a $A250,000 net profit result for the June 2012 year is a good result as it comes in spite of a massive 19% drop in realised nickel price during the year and a further 10% fall since the start of the new financial year.
The company has two mining centres in the world class Kambalda nickel district of Western Australia and the latest result beat the hell out of its $23.4M loss in 2011.
Mincor has worked hard to cut its cash costs by 27% to produce an EBITDA up 99% to $32.4M, but got smashed by a 19% fall in the average realised nickel price.
Full-year production came in at 9,179t of nickel-in-concentrate at a cash cost of $A5.78lb, with production guidance for 2012/13 now down to 9,000t of nickel-in-ore at targeted cash costs thankfully also down to $5.50lb payable nickel. All of which bodes not so well when other, non-cash costs, take ultimate costs dangerously close to the current less than $US7lb nickel spot price.
But the company has answered shareholder clarion calls by maintaining its unbroken dividend record via a fully franked final 2cps, the same as 2011.
Operational earnings of $42.3M saw $17M returned to shareholders via dividends and share buy-back, $15.65M spent on mine capital, $3.1M in extensional drilling at Kambalda and $9.4M in exploration elsewhere in Australia and Papua New Guinea. Importantly, Mincor ended the financial year with $76M in cash and no debt.
Mincor’s production for the year was 332,877t of ore vs the previous year’s 395,979t at an average 3.09% for 9,179t of nickel-in-concentrate vs 9,056t at an average cash cost of $5.78lb payable nickel vs $7.95lb, resulting in an average cash margin of $3.11lb vs $3.00lb.
The key to the improved performance was Mincor’s decision to move its South Kambalda Operations (Miitel and Mariners) to owner-mining.
Capital expenditure on mine development for the year totalled $15.7M, providing access to new high-grade production sources such as the Terrace and N10B ore bodies at Mariners, the N29C ore body at Miitel, and the MNO3 ore body at McMahon.
Mincor MD David Moore says he’s pleased Mincor has been able to achieve a return to profitability and generate a strong operating surplus, despite an increasingly tough operating environment for nickel miners.
Mincor expects to produce about 283,000t of ore at an average 3.2% from its Kambalda Operations for 9,000t nickel-in-ore for 2012/13. Cash costs are targeted at $5.50lb payable nickel. Capital expenditure for the year is estimated at $15M, focused mainly on the continued development of the N10B ore body at Mariners and the N29C ore body at Miitel.
Moore cautions that the operating environment remains extremely challenging, with Australian dollar nickel prices now at lows last seen during the worst of the global financial crisis. “While we believe these low prices are not sustainable, we must be prepared for anything, and will take whatever action necessary to weather this storm”.
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