Lower LME prices pull down Nickel Asia Q1 sales, profit

Nickel Asia Corp. posted lower sales and income despite higher shipment volume in the first quarter of 2012 as benchmark London Metal Exchange (LME) prices dipped.

In a report to the Philippine Stock Exchange on its unaudited financial and operating results, Nickel Asia said its sales dipped by 16 percent to P1.75 billion in the first three months of 2012 from P2.07 billion in the same period last year as a result of lower LME nickel prices.

The company’s attributable net income (net of minority interests) reached P285.4 million or 33 percent lower than the P428 million reported in the first three months of last year.

Earnings before interest, tax, depreciation and amortization stood at P698 million, up from P1.31 million in the previous year.

First quarter shipments of payable nickel were priced at an average of $8.78 per pound, down from $11.63 per pound in the same period last year.

“LME nickel prices in the first quarter of 2011 were quite favorable compared to the full year average realized price of $10.53 per pound,” Nickel Asia said.

In terms of shipments sold on negotiated prices per wet metric ton (WMT) of ore, a higher average price of $22.58 per WMT was realized compared to $21.36 per WMT in the first quarter of 2011, the company said.

Sales volume of nickel ore grew by 28 percent to 1.82 million WMT in the first quarter of 2012 from 1.42 million WMT in the same period last year. Of the total ore sold, 222,600 WMT of saprolite ore were shipped to Japanese customers (from 279.2 million WMT); 655,000 WMT of low-grade saprolite and limonite ore were shipped to Chinese customers (471,400 WMT), and 941,800 WMT of limonite ore was delivered to the Coral Bay hydrometallurgical processing plant (from 674,300 WMT).

Shipments were made from Nickel Asia’s Rio Tuba mine and from stockpiled ore from the Taganito mine. Shipments from the company’s two other mines, Cagdianao and Taganaan, typically start in the second quarter following the end of the rainy season in the southern part of the country. At this time, the two latter mines resume operations. Consequently, Nickel Asia said, a large part of the first quarter shipments was in the form of low-grade limonite ore, sold largely based on prevailing LME prices.

“Because of the seasonality of our mining operations, the first quarter is our slowest quarter,” said Nickel Asia president and CEO Gerard H. Brimo.

“As in previous years, we will see a pick-up in shipments in the second quarter, particularly of higher margin products such as high-grade saprolite ore and low nickel-high iron ore varieties.”

Due to the increase in shipment volumes, total operating cash cost rose by 34 percent in the first three months of the year to P948.3 million from P707 million in 2011. On a per WMT of ore sold, total operating cash costs increased to P521.19 per WMT from P496.16 per WMT in 2011.

Saprolite type nickel ore form beneath the limonite zone, which is closer to the surface and tend to have lower nickel content.