Minara Tips Strong Nickel Output 17/10/2006 1:26PM DOW JONES NEWSWIRES
PERTH (Dow Jones)--Number two Australian nickel producer Minara Resources Ltd. (MRE.AU) has no plans to join the current flurry of mining mergers, despite a steep run in its share price over the past few weeks.
"There is nothing on our agenda at this stage," said Minara chief executive Peter Johnston.
Instead, the Perth-based company is focused on production targets at its 60%-owned Murrin Murrin nickel mine in Western Australia, Johnston told Dow Jones Newswires in an interview.
Murrin Murrin is on track to produce around 9,00 metric tons of nickel in the December quarter, following a record 9,202 tons in the September quarter.
"We've had one good quarter, but we need to cement another one to really prove to people that we have a new platform of production," Johnston said.
"We've been trying to average 100 tons a day and have been doing that consistently now for several months."
Murrin Murrin was built in the late 1990s, but is yet to reach its nominal capacity of around 40,000 tons per year because of a series of costly breakdowns at its high pressure acid leaching plant. Formerly known as Anaconda Nickel, Minara narrowly avoided financial ruin several years ago when U.S. bond holders, who helped fund construction of the mine, accepted a cash settlement of 25.6 U.S. cents to the dollar.
Some analysts believe the company has finally turned the corner, with improved reliability at Murrin Murrin coinciding with 19-year-high nickel prices.
Early last week Citigroup upgraded the stock to buy from hold, with a price target of A$4.82 per share, but the shares have since raced beyond that level. They added 7% Monday to a record high A$5.31, valuing the group at A$2.5 billion, and were 12 cents easier at A$5.19 in Tuesday afternoon trade.
The shares have roughly doubled in the past two months. Like several of its peers, including Independence Group (IGO.AU), Mincor Resources Ltd. (MRE.AU) and Jubilee Mines (JBM.AU), Minara has benefited from a strong run-up in nickel prices.
Stocks of the steel-making additive are running low and analysts say the outlook remains tight because of solid demand and a dearth of new mines.
Aside from high prices, Johnston said that Minara is attracting investor interest as one of the world's few sizable nickel plays after the recent multibillion dollar takeovers of North American groups Inco and Falconbridge.
Minara is Australia's second-biggest producer of the metal behind BHP Billiton (BHP), which became a major nickel miner last year following its A$9.2 billion acquisition of WMC Resources.
The WMC deal was Australia's last major nickel takeover. From time to time Minara is mentioned as a possible target, although M&A speculation last week centered on diversified miner Oxiana Ltd. (OXR.AU).
Minara is owned 51% by Swiss-based Glencore International AG, which also owns the other 40% of Murrin Murrin. Glencore markets all of Murrin Murrin's nickel, which is produced in the form of briquettes.
Johnston declined to comment on a forecast by Citigroup that Minara may have A$300 million in cash by the end of the quarter, enabling it to pay a final dividend of 26 cents a share. The size of the dividend is a "board decision for February," Johnston said.
The company paid an interim dividend of 12.5 cents last month, based on a record A$100.7 million first half profit.
MRE Price at posting:
0.0¢ Sentiment: None Disclosure: Held
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