MPI nickel output set to beat targetsGreg TubbyMonday, November...

MPI nickel output set to beat targets

Greg Tubby


Monday, November 03, 2003
PRODUCTION at MPI Mines' Silver Swan operation is running ahead of prospectus forecasts and is on track to top more than 10,000tpa contained nickel in 2004, according to managing director Brian Phillips.

Subject to finalisation of the off-take contract and financing, MPI plans to break ground on its Black Swan Disseminated openpit in early 2004 to supplement production from the underground operation.

"We will initially mine at a rate of 450,000tpa ore and produce 2500tpa in concentrates [from BSD], with the first concentrates produced around June 2004," Phillips said in an open briefing to the Australian Stock Exchange.

"Our intent with BSD is to ramp up once any start-up issues have been resolved and we hope to double production rates to 5000 to 6000tpa from this deposit."

The current BSD model would see the openpit produce until 2009 to coincide with the expected closure of the Silver Swan underground operation.

"Of course, we hope to extend the resource at Silver Swan – and we'll keep exploring – but we currently don't model it," Phillips said.

"At the 450,000tpa rate we will have mined 2.6Mt at BSD by 2009 containing 21,000t nickel, which is only 36% of the resource. So clearly, at current nickel prices we will be evaluating expansion options.

"We hope to get BSD producing at 1Mtpa for around 5000 to 6000tpa contained nickel, but we will see the start-up case working first."

MPI is also looking at refinancing its vendor finance with Outokumpu, which would release the titles to its nickel leases and enable it to increase its hedging.

"We intend to hedge BSD production as this mine has been designed as a swing producer – it makes a great return on capital at current prices but is marginal at bottom of the cycle nickel prices. So it makes great sense to hedge for this particular business, whilst retaining as much upside to rising prices as possible," Phillips said.

Since taking over Silver Swan from Outokumpu in August last year, MPI has focussed on restoring a viable long-term operation, but is now expanding its exploration activities with drilling underway at Honeymoon Well.

Phillips said the junior also plans to expand near-mine exploration drilling on EM and conceptual targets at Silver Swan.

"To date most of our focus has been on resource extensions at depth and we've been successful in finding similar tenor extensions down to 9800mRL.

"Next year we'll continue this and will also target lateral channels that have been indicated by EEM and conceptual modelling."

In Victoria, MPI plans to spend around $700,000 exploring in the Stawell Corridor during this half year and in the first quarter of 2004.

Phillips said two targets drilled so far have confirmed new gold mineralised zones.

MPI shares were down 7c at $1.61.