By Leia Michele Toovey – Exclusive to Nickel Investing News
Nickel posted a slight gain this week, with three-month nickel adding $270 to hit $18,320 a tonne. This is a modest rise, as nickel prices have plummeted this year due to weak demand from stainless steel makers. The inching up of prices was possibly promoted by the threat of a shrinking supply, evident in the fact that nickel miner Mirabela announced it’s intention of increasing production.
Nickel prices have dropped, say analysts, due to the availability of nickel pig iron as a cheaper alternative. Although a return in demand from the stainless steel manufactures will push up the price of nickel, it is unlikely that it will ever be supported to the degree it was before nickel pig iron came along. This week, there was also the news that Vietnam planned to increase its nickel export fee up to 20 per cent. Vietnam, however, is not a very large exporter so the effect of the decision on the market is not expected to be much.
An update cannot be complete without the mention of Norilsk Nickel. The big news this week is that Vladimir Potanin is appointing one of his closest allies and a former colleague from the KGB, Vladimir Strzhalkovsky, to head the company. Strzhalkovsky, who heads Russia’s state tourism committee and has served 11 years in the KGB in Leningrad, said yesterday he was accepting Potanin’s proposal to stand as candidate for chief executive at the company’s next board meeting. The move to appoint Strzhalkovsky – who has no experience in the mining industry – comes less than a month after Potanin seized control of the company in a battle with Oleg Deripaska’s of United Company Rusal, the country’s biggest aluminum producer. Sergei Batekhin, the Interros Deputy Chief Executive, who was appointed by Potanin to head Norilsk, will remain in charge of the company’s operations, while Strzhalkovsky will be in charge of government relations. Although it is agreed that Strzhalkovsky will earn this position, it has to pass the board’s approval. The board members will vote on August 8.
The move to appoint Strzhalkovsky warmed up the theories of a potential merger between Norilsk and Rusal, to create a $ 100 billion networth mining giant. There were reports that Potanin had proposed the Norilsk-Rusal- Metalloinvest merger last Monday, though there was no official confirmation. UC Rusal, though, has squashed all talk of the merger. The company responded with a statement yesterday that,“UC Rusal considers its acquisition of 25 per cent plus two shares as a strategic investment and still intends to pursue all legal remedies to protect its interests as a share holder of the company.”
In other Norilsk news, the company announced Wednesday that its net profit calculated to Russian Accounting Standards dropped almost 95 per cent in the first half of 2008 to $175.7 million, as compared to the corresponding period last year. The company said its net profit in the second quarter of the year was $1.1 billion, compared with a net loss of $935.7 million in January-March. The first quarter loss was due to write-downs of the company’s investments. Perhaps this is a sign of the health of the nickel market, as Norilsk Nickel accounts for more than 20 per cent of global nickel output.
Mirabela ups production…
Resources developer Mirabela Nickel Ltd. (MBN.AU) is currently building the world’s third-largest open-pit nickel mine in Brazil. This week, Mirabela announced it was increasing the mines’ annual capacity to 6.4 million metric tons, up 40 per cent from a previous plan. The total cost of the operation is now $387 million, up 20 per cent from the previous estimate. Shares rose 3.9 per cent to C$4.05., Wednesday, as the company proclaimed that it had received numerous merger and takeover proposals in the past year. Mirabela is not interested in a merger, claiming that its shareholders support project development by the company. Mirabela has been a favorite with analysts because of the low-risk, high- quality nature of the deposit, scheduled to start output in mid-2009.
..while Xstrata’s production drops
Xstrata (XTA.L) posted mixed first-half production data on Wednesday, with slightly weak output in two key metals, copper and nickel. Nickel, one of the two metals responsible for the bulk of Xstrata’s profits, had its output drop by 6.1 per cent. Mined copper output also fell by 1.1 percent. Nickel accounts for 24 percent of Xstrata’s profits. They hope to compensate for the drop in production by ramping up production in the second half.
