LISTED nickel miner Global Ferronickel Holdings Inc. saw its third quarter net income and revenue crash on the back of weaker ore prices and lower production volume.
Net income in July to September slumped by nearly five times to P797 million from P3.925 billion a year earlier.
Gross sales stood at P3.44 billion, while total revenues were at P3.428 billion.
Amid the low price environment, the company said it mitigated the impacts by shifting production to “more of the middle grade low iron nickel ore.”
Nickel ore sold during the quarter amounted to 2.57 million wet metric tons (WMT) or 24.3 percent lower from 3.398 million WMT.
“Due to lower nickel ore prices, the market for low grade high iron and low grade low iron nickel ore basically disappeared during the year.
The prices of nickel ores slumped to $28.81 per WMT compared to $50.91 per WMT last year. This was on top of the impact of the weak peso against the dollar this year – P46 to $1 from $43.76 to $1 a year ago.
Total cost and expenses also declined to P3.733 billion from P2.546 billion due to lower costs as shipment volume decreased. The firm said costs could be much lower if not for the need to remove the low grade high iron ore prior to mining the middle grade ores.
The lower grade ore was reclassified as waste and stockpiled in the meantime. Should prices recover, the company said, then the material would be reclassified again as ore and be available for sale.
“Current market conditions remain difficult for the industry but the company is taking steps to reduce our costs, and with the Ipilan Nickel expected to become operational in 2016, [it should]provide production volume increases as well as higher priced ore,” Dante Bravo, Global Ferronickel president, said.
“We also believe that the current low price environment is not sustainable as majority if nickel processors are not making money. China is in a transition phase to emphasize consumption led economy. However, with the industrial sector, a large component of their GDP [gross domestic product]have to protect the sector, too,” he said.
“Therefore, the 13th five year plan would try to address this issue. Hopefully, their action would revive the market for commodities,” he added.
Last August, Global Ferronickel acquired 90 percent control of the 2,835 hectare Ipilan mine in Palawan after acquisition of Southern Palawan Nickel Ventures Inc. for $50 million. The acquisition will translate to an additional 3 million WMT of medium to high grade ore yearly, increasing annual production by 50 percent. Ipilan mine operations will start next year.
At present, the third largest nickel miner is primarily exporting 90 percent of its output mostly to China and 10 percent to Australia.