Mirabela Nickel Limited has announced its unaudited third quarter results for the period ended 30 September 2010.
- Production of 2,405 tonnes of nickel in concentrate for the quarter (Q2: 2,304)
- Sales of 2,359 tonnes of nickel in concentrate for the quarter (Q2: 2,505)
- Continued decrease in unit cash costs to US$6.76/lb for the quarter; expected to continue with increasing production levels (Q2: US$7.62/lb)
- Break-through mining performance with target material movement achieved during September
- Ore production commences in the South Pit; pre-stripping accelerated in the Central zone
- 2010 production guidance: tracking towards 9,500 - 10,000 tonnes of nickel in concentrate
- Cash balance of US$89 million at quarter end with successful completion of the first tranche of an equity raising during the quarter
Ramp up of the Santa Rita operation continued during the third quarter. The operation is expected to reach an annualized full capacity of 23,000 to 25,000 tonnes of contained nickel in concentrate per annum in 2012. Completion of the open pit pre-strip and the expansion of the processing plant are planned for 2011.
Since commencing operations the project's strong safety performance has continued with no lost time injuries for the third quarter.
The Lost Time Injury Frequency Rate for the first three quarters of the year was 0.9, and remains well ahead of the Brazilian mining average. The implementation of safety training and safety improvement programmes is continuing.
The primary difference between the grade mined and the grade processed is due to the additional processing of lower grade material (not classified as ore) whilst the ramp up of the mining operation is catching up to the processing plant.
Mining rates and mobile fleet performance improved significantly during the quarter. Material movement targets were achieved during September with improved equipment availability and productivity, as well as the arrival of the new contractor shovel and the CAT 994 front end loader.
The South Pit pre-strip was completed during the quarter with first ore production occurring during September. The mining team continued their focus on waste removal to open up the strike length of the open pit, which will provide more mining flexibility and is vital for the progress towards full production levels.
During the third quarter a total of 846,000 tonnes of ore was mined at an average nickel grade of 0.55%. Mining in the North Pit moved through a major fault structure during August and September and this resulted in higher than average levels of fine, chloritic altered material being mined. To date the quality of the South Pit ore has been good with minimal fines.
During October, six hired CAT 777 trucks and a purchased DML drill rig were added to the fleet. The additional fleet is being used to accelerate the pre-strip in the central zone of the pit. Three CAT 785 trucks are due for delivery in December.
The processing plant's performance was impacted by the higher levels of the chloritic altered material and restricted by a planned, major plant shutdown during August. The shutdown, which included a reline of the SAG and ball mills, was completed on time and within budget.
During the quarter a total of 942,000 tonnes of ore was milled at an average recovery of 49% for the quarter, with plant throughput improving to 82%. The blending of low grade ore into the mill feed continued. Since some additional changes to the flotation and grinding regimes, in response to the higher than average levels of fine, chloritic altered material, recoveries increased to an average above 55% from the middle of September.
Short term recovery improvement work is continuing. Improvements in reagents, grinding and the flotation regime have resulted in improved performance when treating high levels of fines. Material which previously recovered poorly is now achieving acceptable levels of recoveries. Short term plant performance will improve further as mining flexibility and stockpile blending options increase. A pilot plant test program is underway to determine the preferred process flow changes to provide a long term solution to the processing of the chloritic, altered fines. Results to date have confirmed the opportunity to achieve higher recovery rates through mechanical separation of the fines.
During the quarter a total of 2,405 tonnes of contained nickel in concentrate, 774 tonnes of contained copper in concentrate, and 41 tonnes of contained cobalt in concentrate were produced. All production continued to be within contract specifications and 2,359 tonnes of nickel in concentrate was sold to Mirabela's domestic customer, Votorantim Metais Niquel S.A.
Total nickel production to date is 6,700 tonnes of nickel in concentrate. Full year production guidance is currently tracking at 9,500 to 10,000 tonnes of nickel in concentrate. The final quarter of 2010 is expected to be strong with improved processing plant throughput, improved plant recoveries and improved mining rates.
No exploration activity was conducted during the quarter.
Unit Cash Costs
Average Payability of 89%
Including prior period QP adjustments
Excludes Royalty (5.5%)
Including prior period QP adjustments and realised hedging
Average exchange rates for Q3: US$/Real 1.75 (Q2:1.79; Q1:1.80)
The unit cash cost of production decreased for the third successive quarter to US$6.76 per pound of nickel. Unit cash costs are expected to continue to fall as production levels increase. Mining, processing and administration unit costs are expected to fall with increased production levels whilst transport unit costs are expected to rise when shipping concentrate to Norilsk Nickel commences.
Cash Position and Funding
As at 30 September 2010, Mirabela held balances of cash on hand and on deposit of US$89 million, plus US$10 million held in the Santa Rita contingency reserve account.
On 8 September 2010 the Company launched an institutional share placement to raise a minimum of US$135 million and a maximum of US$165 million ("Global Offer"). The share placement consisted of:
- an unconditional placement of ordinary shares on the Company's Australian register in respect of those shares issuable without prior shareholder approval ("Unconditional Placement");
- a placement of ordinary shares to settle on the Company's Australian register in respect of those shares issuable only upon shareholders approval pursuant to ASX Listing Rule 7.1 (relating to the issuance of more than 15% of the issuers share capital) ("Conditional Offer"); and
- a placement to settle on the Company's Canadian register consisting of (i) ordinary shares; and (ii) subscription receipts, each entitling the holder thereof (without the payment of additional consideration) to one ordinary share of the Company upon satisfaction of certain conditions, including shareholder approval to the issue of those underlying shares.
In addition to the Global Offer but subject to shareholders' approval, the Company planned to also raise US$7 million through placement of shares to related party entities (binding subscription agreements were received from Lancaster Park SA and Executive Chairman, Craig Burton) and up to a further US$10 million from a Share Purchase Plan (SPP).
On 20 September 2010 the Company completed a private placement of 48,896,905 ordinary shares at a price of AU$1.60 per share in Australia and 6,177,500 million ordinary shares at a price of C$1.52 (the Canadian dollar equivalent of A$1.60 on 8 September 2010) to Canadian investors, raising gross proceeds of US$80.6 million and placed 6,472,500 subscription receipts at a price of C$1.52 per subscription receipt. The gross proceeds (US$9.4 million) from the issue and sale of the receipts were placed in escrow pending satisfaction of certain release conditions, including shareholder approval to the issue of those underlying shares.
On or about 26 October 2010 the Company will issue a further 69,324,107 shares as part of the conditional component of the offer, after all resolutions were passed at a shareholders meeting held on 19 October 2010:
- 57,704,466 shares pursuant to the Global Offer, which includes 6,472,500 shares following conversion of the Subscription Receipts;
- 3,895,997 shares to Lancaster Park SA and 888,561 shares to Mr Craig Burton, who are related parties of the Company; and
- 3,439,342 shares pursuant to a Share Purchase Plan to eligible shareholders and a further 3,395,741 shares, representing the shortfall of the Share Purchase Plan, placed by Macquarie Capital Advisers Limited and UBS AG.
The amount raised under the Global Offer equates to US$179 million when converted at the foreign exchange rates on 25 October 2010.
The proceeds of the Global Offer (US$179 million), the Related Party Placement (US$7 million) and the SPP (US$10 million) are anticipated to be used in the following manner:
- US$38.1million towards pre-payment of principal amounts due during 2011 under Mirabela's existing US$190m senior finance facility;
- US$15.0 million as an addition to Mirabela's Contingent Support Account;
- US$40.0 million to fund the expansion of the plant at Santa Rita;
- US$95.3 million for general working capital to fund operations and to pursue growth; and
- US$7.6 million to pay the expenses of the Offer.
Subject to meeting a number of conditions including (a) a minimum of US$100 million in new equity being raised, and (b) Mirabela applying US$38.1 million of the proceeds of such raising to make the pre-payments set out above, the lenders of the Credit Facility have agreed to waive testing of certain covenants of the Credit Facility during 2011. These banking concessions will allow Mirabela's management team to focus on ramp-up at Santa Rita and expansion of the open pit. Following the pre-payment of the US$38.1 million of senior debt, Mirabela will not have any principal repayments due under the Credit Facility until March 2012.
As at 30 September 2010 the Company's issued share capital consisted of 422,237,130 ordinary shares, and a balance of 13,300,000 unlisted options were outstanding.
During the quarter the following shares were issued:
- 48,896,905 ordinary fully paid shares pursuant to an unconditional institutional placement to sophisticated investors in Australia; and
- 6,177,500 ordinary fully paid shares pursuant to a private placement to "accredited investors" primarily in Canada.
No options were exercised during the quarter.
Subsequent to the third quarter close and shareholders' approval the following shares will be issued on or about 26 October 2010:
- 57,704,466 ordinary fully paid shares, including 6,472,500 upon conversion of the subscription receipts issued on 20 September 2010;
- 4,784,558 ordinary fully paid shares to Related Parties; and
- 6,835,083 ordinary fully paid shares consisting of 3,439,342 shares pursuant to a Share Purchase Plan and 3,395,741 representing the shares not placed in the Share Purchase Plan by private placement.
Source: Mirabela Nickel Ltd.