Minara Resources Ltd, Australia's second largest nickel...

Minara Resources Ltd, Australia's second largest nickel producer, has posted an 80 per cent fall in net profit for the half year amid rising costs and declining commodity prices.

Profit for the six months to June 30 dropped to $49.2 million, with rising sulphur and higher energy costs combining with a falling nickel price to drive the result lower.

Revenue for the half dropped to $284.5 million, down 46 per cent on the $529.9 million delivered in the corresponding period of 2007.

"Minara is proactively engaged in reducing costs and is focused on optimising production in a volatile nickel market," managing director Peter Johnston said in a statement.

Shares in Minara climbed two cents, or 1.34 per cent to $1.51 by 1014 AEST.

Minara operates the Murrin Murrin operation located in the northern goldfields region of Western Australia, which is expected to produce between 31,000 to 35,000 tonnes of nickel this year.

Nickel output for the half was 15,022 tonnes, while cobalt production was 999 tonnes.

Minara said the cobalt market has remained strong and has assisted in offsetting some of the cost pressures affecting the company.

Cash costs have climbed 6.3 per cent higher to $US5.24 per pound of nickel for the half amid rising sulphur costs and higher energy prices after an explosion at the Apache Energy Ltd operated Varanus Island plant disrupted gas supplies.

The Murrin Murrin plant lost five days of production and was forced to operate at half to two thirds of capacity for the remainder of the month of June after the Varanus incident.

Minara said that it "anticipates that the sulphur market will return to a normal price cycle in the second half of 2009".

The company said in light of the half year result it had taken a "conservative financial management approach" and did not declare a dividend for the period.