MARKETS SPECTATOR: Nickel knock for Mirabela

Supply, cost and quality problems have beset Mirabela Nickel but the miner says things will improve.

Shares in Mirabela Nickel plunged 22 per cent to a 52-week low after the miner said its nickel production in the first six months was affected by supply disruptions and maintenance work while the ore produced was of lower quality.

Mirabela Nickel’s stock closed down 1.6 cents, or 18 per cent, to 7.2 cents, after falling as much as 23 per cent to 6.8 cents. The shares have plunged 85 per cent this year. On January 9, 2013 the stock reached a 52-week high of 59.5 cents.

Ian Purdy, chief executive of Mirabela Nickel, told Markets Spectator he expects “some recovery” in the company’s stock price along with its nickel production in the last six months of this year. Purdy forecasts the company’s nickel production will increase to between 17,000-18,500 tonnes in the six months to December 31 compared with 8200 tonnes in the first six months of 2013.

“Our stock is trading below fundamentals and there are many such examples across commodity groups,” says Purdy. “It’s a very difficult market for all producers. The key is getting capital expenditure down.”

Mirabela Nickel is cutting its 2013 spending to $US35-$US45 million compared with a previous forecast of $US40-$US50 million.

But the company has been hampered by higher magnesium oxide content in its nickel ore that has resulted in lower quality ore being produced this year. Mirabela Nickel’s primary ore crusher has had problems, forcing the company to use a second crusher. That has resulted in production disruptions as efforts have been made to fix the primary crusher.

A Brazilian nitrate factory, closed for maintenance earlier this year, was then the subject of worker protests interrupting Mirabela Nickel’s access to a key ingredient for explosives last month and this month.

The price of the three-month nickel rolling forward contract on the London Metals Exchange price has fallen 18 per cent this year, according to Bloomberg data. Industrial metals such as nickel have declined in 2013 because of concerns that China will demand less nickel and copper as the world’s second-biggest economy slows. At 1627 AEST nickel was trading at $US13,965 a tonne.

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