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Press release from CNW Group

Mirabela Nickel Limited - Quarterly Activity Report for the Period Ended 31 March 2013

Monday, April 22, 2013

Mirabela Nickel Limited - Quarterly Activity Report for the Period Ended 31 March 2013

21:02 EDT Monday, April 22, 2013

PERTH, Australia, April 23, 2013 /CNW/ - Mirabela Nickel Limited ("Mirabela" or the "Company") (ASX: MBN, TSX: MNB) is pleased to announce its unaudited first quarter results for the period ended 31 March 2013.

HIGHLIGHTS

  • Production for the quarter of 4,151 tonnes of nickel in concentrate (Q4 2012: 5,291 tonnes)
  • Sales for the quarter of 3,907 tonnes of nickel in concentrate (Q4 2012: 5,044 tonnes)
  • Unit cash costs of US$5.10/lb for the quarter (Q4 2012: US$4.91/lb)
  • Average mined nickel grade of 0.48% for the quarter (Q4 2012: 0.55%) and total mining material movement of 8.5 million tonnes (Q4 2012: 8.8 million tonnes)
  • Processing plant throughput of 1.6 million tonnes (Q4 2012: 1.7 million tonnes)
  • Average processing plant nickel recovery of 56% (Q4 2012: 59%) and average nickel feed grade of 0.47% (Q4 2012: 0.53%) for the quarter
  • Cash on hand and on deposit of US$141 million at quarter end (Q4 2012: US$143 million)

OPERATIONS

Mirabela has completed a challenging first quarter with lower than expected performance in both the open pit mine and the processing plant. The open pit continued to be affected by excavator performance as well as access restrictions in the South zone, resulting in lower quality ore through the plant. Despite the lower production volumes, the Company successfully achieved unit cash costs at the lower end of guidance and managed to maintain its strong cash balance.

During April 2013, the Company implemented a structural change to its mining operations, replacing its three underperforming O&K 120 tonne excavators with two Hitachi 2500 excavators owned and operated by the Company's contract mining service provider, U&M. U&M has the second largest excavator fleet in Brazil and has been mining for Mirabela for the past three years, already performing over 30% of the Company's excavation and haulage. This change was driven by the continued poor performance of the O&K excavators. As part of this restructure Mirabela has retrenched approximately 60 personnel from the maintenance and stores areas.

The Company provided the following guidance for 2013: production of 22,000 to 24,000 tonnes of nickel in concentrate; unit cash costs to average between US$5.00/lb and US$6.00/lb for the year; and capital expenditure, exploration and study costs forecast at between US$40 million and US$50 million. Year to date, Mirabela is approximately 2,000 tonnes of nickel production behind budget and as such, the lower end of the Company's 2013 production guidance is achievable. However, the Company will need to operate at its budgeted production level for the remainder of the year. The Company will assess the production performance after the recent changes made to the mining operations and provide the market with further production guidance if required. The Company is currently on track to achieve the lower end of both its unit cash cost and capital guidance due to its continued focus on cost reduction.

Safety

Mirabela's safety performance included two lost time injuries during the quarter. The Company's safety performance remains strong with the 12 month moving average Lost Time Injury Frequency Rate closing the quarter at 1.28. Mirabela is continuing to target further improvements to this strong safety record through ongoing safety training and safety improvement programmes.

Production Statistics

           
    Three months
ended
31 Mar 2013
Three months
ended
31 Dec 2012
% change
favourable/
(unfavourable)
Year to Date
2013
Mining          
Total Material Mined Tonnes 8,498,282 8,823,363 (4) 8,498,282
Ore Mined Tonnes 1,164,561 1,764,245 (34) 1,164,561
Nickel Grade % 0.48 0.55 (13) 0.48
           
Processing          
Total Ore Processed Tonnes 1,579,963 1,691,798 (7) 1,579,963
Nickel Grade % 0.47 0.53 (11) 0.47
Copper Grade % 0.10 0.13 (23) 0.10
Cobalt Grade % 0.02 0.02 - 0.02
Nickel Recovery % 56 59 (5) 56
Copper Recovery % 71 70 1 71
Cobalt Recovery % 29 34 (15) 29
           
Production          
Nickel in Concentrate DMT 4,151 5,291 (22) 4,151
Copper in Concentrate DMT 1,169 1,507 (22) 1,169
Cobalt in Concentrate DMT 72 91 (21) 72
           
Sales          
Nickel in Concentrate  (1) DMT 3,907 5,044 (23) 3,907
Copper in Concentrate  (1) DMT 1,119 1,454 (23) 1,119
Cobalt in Concentrate  (1) DMT 69 88 (22) 69
           
(1)      Includes sales volume adjustments upon finalisation of assays.

Mining

Total material movement for the quarter was 8.5 million tonnes of material moved for 1.2 million tonnes of ore. The material movement was below expectations for the second successive quarter mainly due to restricted excavator and loader availabilities. Activities undertaken to improve availability included: the services of a dedicated maintenance consultant; improved contamination control for both fuel and lubricants; improved housekeeping; and extended shut downs for clearing equipment maintenance backlogs. Despite these initiatives, excavator issues continued during the quarter, driven by the inability to obtain spare parts in-country for the problematic O&K equipment, (including hydraulic pumps), and difficulty in obtaining quality technical support.

During April 2013, Mirabela took definitive action to address the excavator issues by outsourcing its excavator operations to its contract mining service provider, U&M. The U&M agreement is based on a cost per tonne, incentivising higher availability and material movement whilst also delivering significant cost savings. The increase in U&M excavator volumes will be achieved by the addition of two Hitachi 2500 excavators, each capable of moving 1Mt of material per month. Mirabela has parked-up its three O&K excavators and terminated 60 personnel in the maintenance and stores areas. The move from three to two excavators is also expected to result in the open pit mining operations becoming less constricted, whilst still allowing for excess capacity within the excavator fleet together with increased flexibility in the production schedule. The Company will continue to operate its two CAT 994 front-end loaders.

Mine grades of 0.48% were lower than the previous quarter primarily driven by the sourcing of lower grade ore from the Central zone. Access to the better quality ore in the South pit continues to be restricted by geotechnical instability in the temporary pit wall between the higher Central zone and lower South zone. Remedial works continued to relocate the pit access ramp and once complete the plan is to mine the area from the top.

Processing

During the quarter 1.6 million tonnes of ore was milled, at an average head grade of 0.47% nickel and achieving an average recovery of 56%. During the quarter low-grade stockpiled material was processed due to restricted ore availability in the mine. The recovery performance for the quarter was better than the expected grade vs. recovery algorithm for ore quality processed due to continued improvements in the process plant setup and the reagent regime.

The lower plant throughput was driven by several factors including: the reduced availability of quality ore to process; plant instability caused by local power failures associated with heavy rainfall; and restricted availability of the primary crusher. The Company is working with Metso Brazil and Lycopodium to assess the best course of action to improve the performance of its gyratory crusher with the crusher requiring major maintenance due to notable stress problems in the civil footings. The Company is looking to mitigate the poor performance of its primary crusher through improved performance of its second crushing line and possible deployment of mobile crushers.

During the quarter Mirabela produced 4,151 tonnes of contained nickel in concentrate, 1,169 tonnes of contained copper in concentrate, and 72 tonnes of contained cobalt in concentrate.  3,907 tonnes of nickel in concentrate was sold to Mirabela's off-take partners, Votorantim Metais Niquel S.A. and Norilsk Nickel. One export shipment to Norilsk Nickel was completed during the quarter with steady deliveries to Votorantim continuing. The next shipment to Norilsk Nickel is expected in late May to early June.

Exploration & Studies

Exploration activity for the quarter was focused on tenement maintenance only. The Company has deferred all growth activities in order to preserve cash.

Mirabela's priority remains continued production optimisation and low capital, incremental expansion. The Company continues to supplement its in-house technical capability with expert consultants, Optiro and Lycopodium. Both Optiro and Lycopodium have completed their initial site visits and identified opportunities for improvement which are undergoing further technical evaluation.

Unit Cash Costs

           
    Three months
ended
31 Mar 2013
Three months
ended
31 Dec 2012
% change
favourable/
(unfavourable)
Year to Date
2013
Payable Nickel Production(1) lbs 8,144,726 10,381,534 (22) 8,144,726
           
Production Costs          
Mining Cost US$/lb 2.50 2.41 (4) 2.50
Processing Costs US$/lb 1.69 1.37 (23) 1.69
Administration Cost US$/lb 0.57 0.48 (19) 0.57
Subtotal US$/lb 4.76 4.26 (12) 4.76
           
Selling Costs          
Transport/Shipping Cost US$/lb 0.13 0.14 7 0.13
By-Product Credit(2) US$/lb (1.23) (0.91) 35 (1.23)
Smelter Charges US$/lb 1.44 1.42 (1) 1.44
Subtotal US$/lb 0.34 0.65 48 0.34
           
C1 Unit Cash Cost US$/lb 5.10 4.91 (4) 5.10
Unit Royalty Cost US$/lb 0.40 0.37 (8) 0.40
Realised Nickel Price(2) US$/lb 7.82 7.30 7 7.82
Realised Copper Price(2) US$/lb 3.49 3.27 7 3.49
Realised Cobalt Price(2) US$/lb 9.49 11.00 (14) 9.49
Average US$/Real Exchange Rate   2.00 2.06 (3) 2.00
(1)      Average payability of 89%
(2)      Including prior period QP adjustments

Mirabela recorded an excellent C1 unit cash cost for the first quarter. The unit cash cost result occurred despite lower nickel production (down 22%); the BRL strengthening slightly against the USD (Q1 2013: 2.00 versus Q4 2012: 2.06); and significant inflationary pressures that included: an increase in explosive costs of 22%; diesel costs of 14%; employee food services of 11%; and Caterpillar service costs of 21% during the quarter. The lower unit cash cost was driven by: the realisation of cost reduction initiatives; reduced mining and processing activity costs; and higher by-product credits.

The Company recognises that its best response to the current challenging nickel market is its continued focus on cost reduction and production optimisation initiatives. The Company continues to remove and reduce costs from all areas of the business and this, together with an expectation of improving production, should underpin continuing strong unit cash cost results.

CORPORATE

Cash and Debt

As at 31 March 2013, Mirabela held balances of cash on hand and on deposit of US$140.80 million. The Company managed to maintain its very strong cash balance through disciplined cash management and reduced spending. The small decrease in cash on hand from 31 December 2012 (US$143.01 million) was driven by: budgeted capital expenditure of US$9.86 million; finalisation of nickel sales that occurred in June, August and September 2012 at an average finalisation price of US$7.37/lb compared to an average provisional price of US$7.40/lb (US$2.30 million); interest payments of US$1.72 million on the Banco Bradesco S.A. working capital facility and repayment of US$2.04 million relating to the Caterpillar finance lease facility; offset by positive cash flow from operations.

During the quarter, Mirabela successfully negotiated revised payment terms on its US$50 million debt facility with Banco Bradesco S.A. The revised repayment terms provide for three equal instalments of US$16.67 million, repayable in January, July and December 2014. Interest remains payable bi-annually at a rate of LIBOR plus 6%.

Share Capital

As at 31 March 2013 the Company's issued share capital consisted of 876,765,094 ordinary shares. A balance of 4,150,000 unlisted options and 1,690,582 performance rights were outstanding.

The Company issued 182,358 shares during the quarter as a result of the conversion of 182,358 performance rights into shares. During the quarter 56,322 performance rights lapsed and 215,595 performance rights were cancelled in accordance with the Mirabela Nickel Ltd performance rights plan.

No options were exercised during the quarter.

   

 

 

 

SOURCE: Mirabela Nickel Ltd.

For further information:

CONTACT DETAILS 

Chris Els
Chief Financial Officer & Company Secretary
Telephone: +61 439 930 333
shanik@mirabela.com.au 

Ian Purdy
Chief Executive Officer & Managing Director
Telephone: +61 410 491 908
shanik@mirabela.com.au 

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