First quarter production of nickel in concentrate came in at 1 555 tonnes against 2 246 tonnes in the fourth quarter of 2016 while head grade fell 23 percent to 1,76 percent in this quarter.
Asa Resource Group Plc, the AIM-listed parent company of Africa’s only integrated nickel miner, said in a production update last week that head grade declined by 4 percent to 87 percent compared to 90,8 percent in the last quarter of 2016.
BNC’s tonnes mined increased by 24 percent from the fourth quarter of 2016. The temporary reduction from 287 261t (Q4 FY16) to 274 474t (Q1 FY17) is due to the plant down time and poor performance by the engineering manager, whose services have now been terminated. The plant down time was related to Mill 2’s pinion, which was replaced mid-June 2016.
“I should add, that whilst this quarter (Q1 FY2017) was below expectations, when compared to long-term average, the decrease in sales, recovery and grades are a lot less dramatic. The main reason for Trojan’s under performance was reduced access to higher ore zones,” said chairman Yat Hoi Ning.
He said that the price of nickel remained stubbornly close to its 5-year low of around $8 800/t for most of the first quarter of 2017, but outperformed most base commodities since July.
Analysts long-awaited this move to occur much sooner and it is now not surprising to see solid support for nickel well above $10 000/t. Mr Ning said that this nickel re-rating range will benefit BNC in the second and subsequent quarters.
In this respect, Mr Ning said management believes BNC has weathered the worst of the storm.
“Operating costs are well under control and with the smelter coming on stream at a time when the nickel price is normalising, it is reasonable to expect BNC’s future to be much brighter than in the recent past,” he said.
Due to the absence of functional smelter, BNC said that it gets approximately 65 percent of the market price for its nickel.
In this quarter (Q1 FY2017) the average nickel price BNC realised was $5 728/t (nickel in concentrate), which translates to London Metal Exchange market price of $8 800/t.
Though Trojan Mine’s, the integrated mining and smelting group’s only producing mine currently, C3 (all in sustaining) costs increased to $6 489/t (Q1 FY2017), but Mr Ning said that the listed miner’s stated medium-term C3 target remains in the range of $5 000/t to $6 000/t in the medium-term.
Mr Ning added that it was on record that both the Philippines and China have major environmental concerns over nickel production. This is expected to accelerate the supply deficit and place upward pressure on the price of nickel; should this happen, it would open further opportunities for the BNC.