Extracts: "The crucial thing to understand is that up to now we have been running 8 hour shifts on a three panel roster, which means 3 shift change-overs per day and one day of the week during which the mines are not worked at all. This is an archaic structure that is no longer used anywhere else in WA. From 1 July we’re moving to 11 hour shifts on a continuous roster.
This will bring about an immediate 20% increase in productivities across the board. It will also allow us to top up our existing workforce with fly in, fly out personnel recruited from right across WA, not just Kambalda. That will completely and immediately solve our manpower problems.
Our new contractor starts at Miitel and Wannaway on 1 July. The new mining contract will bring several benefits. Unlike the old contract, the new contract doesn’t have a fixed cost component.
It’s based on a fully variable rate structure so that the contractor’s revenue is entirely dependent on performance. Our new contractor is a recognised leader in underground mining, and is large enough to have the critical mass to supply flexibility in skills and equipment that smaller players just don’t have.
+ + + So again, 1 July is the key date, and we expect a very strong turnaround from then.
"Our Nickel Expansion Strategy is firmly on track. We expect to be operating four mines within the next six months or so. This past year was always going to be slow, with Wannaway winding down and the new operations not yet in production.
We should produce around 8,300 tonnes of nickel in concentrate this year (03/04), ramping up to around 11,000 tonnes next financial year, and 15,000 tonnes the following year. Cash costs, including smelter charges and royalties, will average around A$3.80/lb for Miitel, Redross and Mariners. Wannaway will be higher, at around A$5.00/lb".
In many ways we have never experienced the kind of nickel prices we’re now enjoying. But we have generated solid earnings despite being heavily hedged at around A$5/lb for Miitel and A$4.70/lb for Wannaway. Under that sort of pricing, we’ve reported cumulative net profits after tax of around A$24.5 million, and EBITDA of A$80 million in the 34 months to December 2003.
+ + + All the low-priced project finance hedging has now ended.
Going forward, the strong three-year nickel price outlook gives us an opportunity to increase our margins while we lift our nickel production very strongly – that combination of strong margins and rising nickel production is the key to our future value. We use around A$5.50/lb nickel price in modelling new projects and we like to see an internal rate of return above 30% at those prices. We also calculate the cash break-even point and that is generally around A$3.50-A$4.00/lb for most of our mines".
When we bought Miitel it had an ore reserve of 844,000 tonnes but we’ve since extended that to 1.5 million tonnes. With four mines in operation we will have four major opportunities for “brownfields” type ore extensions. Hence our confidence in, and commitment to, the extensional drilling".
"We also have an exciting gold programme covering the Widgiemooltha Dome. We would hope to make a real dent in that programme during the coming financial year – so far we just haven’t had the resources to do it justice. We simply have too many targets".
MCR Price at posting:
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