By Leia Michele Toovey- Exclusive to Nickel Investing News

Nickel futures were bearish in trading on Wednesday on India’s Multi Commodity Exchange, the MCX.

Nickel October contract was trading down 3.08 per cent at Rs 665 a kg as compared to its previous closing of Rs 686.10. While it opened at Rs 687.90 in the morning trade, nickel November contract moved down 3.17 per cent at Rs 679 a kg as against its earlier closing of Rs 701.20. It opened at Rs 695 in the morning session.

Nickel December contract was trading down 1.69 per cent at Rs 700. It opened at Rs 701.30 as against its previous closing of Rs 712 a kg. 

Nickel was already having a bad year preceding last week’s commodity flop; the metal used in stainless steel has been on a nose dive since this past March. Stainless steel demand has been declining over the past months, prompting nickels drop. Now, stalling equity markets around the globe are hitting the nickel mining companies who need a fresh flow of funds to keep their projects moving forward. Nickel, used mainly in stainless steel, has fallen 49 per cent this year to US$13,475 a ton on the London Metal Exchange (LME).

European nickel is an example of a company that is struggling in the face of a tightening equity market.  Just this week they announced that they were in talks with BHP regarding permission to sell, in advance, nickel concentrate to another buyer besides BHP. The reason for the re-negotiation is that European nickel is falling short US$120 million in funding for its Turkish Caldag nickel project.

European Nickel wants to sell some of the 20,000 metric tons of output from Caldag, which had been committed to BHP, to another party to help finance the project.  Although talks were in their initial stage, European nickel reports that BHP is being agreeable with the potential revision of terms. In March 2007, an agreement was drawn up between BHP and European nickel to buy all the output from the mine, which is to cost $400 million to develop. Development costs have risen about 15 per cent since 2005 and operating expenses for the mine have doubled because of higher prices for diesel, acid and labor. The project will still be profitable if nickel falls to $2.50 a pound ($5,511 a ton). With the tightness of cash around the markets- this forward selling could provide a popular way for companies to gain access to the much needed funds necessary for project development.

Mirabela Nickel Limited (TSX: MNB, ASX: MBN) has drawn down the full US$50 million loan from Norilsk Nickel. This subordinated loan was extended to the Company as part of the recently announced five year nickel concentrate off-take agreement with Norilsk, and will be used to fund ongoing construction of the Santa Rita project. Mirabela Nickel Ltd owns 100 per cent of the world class Santa Rita nickel sulphide project, the largest nickel sulphide discovery world-wide in the last 12 years. Construction of a 6.4 m tpa nickel sulphide concentrator commenced in November 2007 and is currently 60 per cent complete. The plant will produce 18,500 tpa of nickel in a sulphide concentrate from one open-cut mine starting from mid 2009 increasing to 27,000 tpa by mid-2010. At this rate of production the project will have a minimum operating life of 20 years.

Russian aluminum producer United Company Rusal does not intend to sell its stake in OAO Norilsk Nickel, the globe’s biggest nickel producer.  Rusal plans on holding its stake in Norilsk Nickel despite the fact that the company’s shares fell 37.7 per cent on Monday alone. According to Rusal’s largest shareholder, Oleg Deripaska, the stake in Norilsk is a strategic one- and not one necessarily meant to churn a profit.  Those who have been reading my commentaries should have an idea of the political jumble that has been going on in Norilsk this year.  For a refresher, read my July 30 commentary “Rusal Denies Merger Negotiation with Norilsk Nickel.”  Setting its sights ahead, Norilsk Nickel, sees a major drop in revenues as metal prices and its stock index are free falling. On Monday, the industrial giant was the biggest loser of all on the RTS exchange, and in the first half of 2008 the company’s net profit fell by one-third.

1 Comment

Tweet