Stellar profits for mid-tier Australian nickel producers

Three of the best performing Western Australian sulphide nickel producers this week showed why they are share market darlings by producing huge profit performances, aided by a buoyant nickel price.

PERTH - 

High flying miner Jubilee Mines NL, which has mining grades in WA's north eastern goldfields that other nickel miners envy, today produced a gross profit margin for 2006/07 of 70.6% by lifting its net profit on the previous year by 67% to $A173.1 million ($US138.8 M).

Also on the mining profit bandwagon were two of Kambalda's leading miners - Mincor Resources NL which had its fifth straight year of earnings growth with a record profit of $A101.33 M ($US81.26 M) up 246% on the previous year, and Independence Group NL which lifted its after-tax profit for 2006/07 by 201% to $A105 M ($US84.21 M)

Jubilee's Chief Executive Kerry Harmanis said that after taking into account ongoing capital requirements for development and exploration, the company's board has declared a record final fully franked dividend of A37 cents per share, increasing the full-year payout to A67¢ (US53.7 ¢).

He said the excellent full-year financial result was achieved during a transition year at the 100%-owned Cosmos nickel operations, though lower nickel production was more than offset by record nickel prices.

At financial year end, Jubilee had record cash and receivables (after adjustments due to re-valuation of some recent nickel shipments) of $A274.5 M ($US220.06 M), and no debt.

Harmanis said this provides a strong financial platform to fund new mine developments and intensive exploration -- including its increased annual search commitment of $A40 M ($US32.08 M). Key development projects include anticipated construction of a new mine and treatment facility at Sinclair, 100 kilometres south of Cosmos - Jubiless's first new mine outside of the Cosmos area; and development of the Prospero mine near Cosmos.

Nickel production for the year was 8,633 tonnes of nickel-in-concentrate, with the lower volume reflecting the transition from ore production solely from Cosmos Deeps to production from the Alec Mairs 1 and 2 deposits and the Tapinos deposit, 4.5km south of Cosmos. This was achieved from processing 219,602 tonnes of ore at an average grade of 4.22% nickel (2005/06: 220,610t at 5.42% nickel). Cash operating costs averaged $A5.14/lb (US$4.05/lb).

Jubilee's targeted base case production for 2007/08 is 12,000t of nickel-in-concentrate with average annualised cash operating costs forecast at about $US3.25/lb.

Independence, which mines the Long shaft at Kambalda and sends its ore like other Kambalda miners to the local BHP BIlliton-owned concentrator, said it was paying a dividend of A18¢/share for the year and had a record nickel production of 9,825t of contained nickel, up 10% on the previous year.

Revenue for the year increased 100% to $A226.5 M ($US181.65 M) and the balance sheet showed at year end cash and equivalents of $A152 M ($US121.9 M), with an additional $A12.5 M ($US10.05 M) in net receivables, and total debt was $A1.9 M ($US1.54 M).

Mincor -- now Kambalda's biggest producer through a joint venture and discovery work on Carnilya Hill and acquisition of mines from a private outfit -- had a record cashflow of $A192.16 M ($US154.11 M), up 269% on the previous year and declared a record full year dividend of A12¢/share (US9.62¢/share).

Mincor's production was 12,927t of nickel in concentrates from four mines and could be producing from six mines this fiscal year.

The company delivered 616,230t grading 2.46% Ni to the Kambalda concentrator and achieved an average nickel price of $A17.28/lb ($US13.85/lb) with an average cash margin of $A10.69/lb ($US8.54/lb).

Mincor's elation about the financial result was dented with the unexpected death a few days ago of the company's Director of  Exploration Jim Reeve, considered to be the fount of knowledge on Kambalda's mining history.

Even if there is a softening of the nickel price in the new financial year, Perth analysts believe all three companies will continue to be strong performers.

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