By Leia Michele Toovey – Exclusive to Nickel Investing News
Thursday nickel prices fell 6 percent after stainless steel producer Outokumpu said it expected delivery volumes in the third quarter to fall, and expressed concern over next year’s numbers. London Metal Exchange nickel shrunk 2.1 percent at mid-session to hit a low of $18,400 per tonne, the lowest since June 2006. When demand is weak, steel consumers hesitate on purchases, as they bet on further price drops. Currently, this is exacerbating nickel’s price decline, which has plummeted from its rate of $50,000 per tonne one year ago.
Friday, nickel inched up from its Thursday price to reach $18,700 per tonne. London nickel futures extended their decline in Asian trading on Friday, but a sharp sell-off on Thursday had only a limited impact on Shanghai metal futures. So far this month nickel futures have lost 15 percent. Jinchuan Group, China’s largest nickel producer, cut spot prices by 11 percent to 155,000 Yuan a tonne on Friday, reflecting the lower international prices. Chinese nickel prices are still higher than international prices, implying that imports could pick up in the near future. Chinese nickel imports have already risen 21 percent in the first half of the year, as steadily falling international prices allowed traders and consumers to restock.
Mirabela (TSX:MNB) will start nickel production at its Santa Rita open pit mine in northeastern Brazil by mid-2009. The mine will come into production despite falling prices and a strong local currency. The deposit at Santa Rita is a sulphide-type deposit with estimated reserves of 540,000 tonnes of nickel– the largest deposit discovered in the last 12 years worldwide. The mine is still economical at current nickel prices, as production costs are low for nickel sulphide deposits, at around $6,600 per tonne at the current Brazilian real exchange rate of less than 1.6 reals per dollar. Start-up costs for the mine were $322 million, half of which was funded by equity raised primarily on the TSX, with the rest financed by a debt package agreed upon last week. Commodity producers in the resource-rich country whose products are traded in dollars on the world markets have been penalized by the steady strengthening of the Brazilian real, which was trading on Thursday at its strongest in nine years. Fortunately, Mirabela has positioned itself well to cope with rising costs by hedging most of their construction costs, and by mining a sulphide deposit. In addition, by adding cobalt and copper content of the site will cause revenues to go up by 10 percent. After a few years in production, Mirabela will expand the site to include an underground operation. The company has already received very good drilling results from the underground resources. Mirabela was set up by three geologists after their personally funded initial exploration of the Santa Rita site showed promise. The firm made a deal this month to sell half of the mine’s nickel concentrate output to Brazil’s Votorantim Metais Niquel S.A. for five years, and they are currently in advanced negotiations to sell the remainder to Norilsk Nickel.
A new organizational structure of the corporate centre at Norilsk Nickel was approved this week. This new structure was developed to adapt to the executive step-downs the company has witnesses in the recent weeks. Norilsk’s new structure will simplify the Company’s management system by consolidating structural units that report immediately to the General Director of Norilsk Nickel. This involved the creation of a new position of the First Deputy General Director, while reducing the number of Deputy General Directors and the number of subdivisions directly subordinate to the Company’s General Director from 22 to 15. Also, at this time, Norilsk Nickel is launching an investigation into the conduct of departing deputy chief executive Maxim Finskiy. Russian media reported Finskiy is to head a new mining company Intergeo, founded by former Norilsk’s major shareholder billionaire Mikhail Prokhorov. Norilsk said the investigation relates to the transfer of mining and project licenses now in possession of Intergeo.