New acquisitions ‘might not be a good idea’
GLOBAL Ferronickel Holdings Inc. is not keen on acquiring new mines but will pursue its follow-on offering when the local bourse starts to recover.
The company is only waiting for market volatility to end then it would make a follow-on offering, said Dante Bravo, Global Ferronickel president.
“But if there is a good opportunity for mergers and acquisitions, then why not. But if you say, you are going to exhaust your funds to buy new mines, that might not be a good idea,” Bravo said.
The executive said that the nickel mining firm will focus on its two mines in Surigao and Palawan,
Asked about a timeline for their follow-on offering, Bravo said, “As soon as the market improves and there will be good opportunity for us to have new funds to expand to other metals.”
He said that while their competitor Nickel Asia Corp., the country’s largest producer, is expanding to other businesses like power, Global Ferronickel will concentrate on mining activities but is looking at diversifying to other metals like copper and gold.
Bravo said prices of these commodities seem to have bottomed out in the world market and it may take anywhere from five to 10 years before prices start to go up.
“We think that over the long term, prices of other metals like gold and copper will start to recover. But you have to position your company ahead of that,” he said.
Bravo said that nickel being their core business, they are looking at the long-term prospects of nickel mining, as Indonesia may not export its nickel ore to China any more. Indonesia started its export ban on nickel in 2014.
China, the world’s second largest economy, has no nickel ore deposits and relies on the Philippines for its supply requirements. Its economy, however, is slowing down, thereby also pulling down the prices of nickel in the world market as demand declines.
“We do not expect Indonesia to sell nickel ore [anymore]because in the long term, they would be producing nickel products, but that means it would be competing with big markets like China. So for now, it would just be the Philippines [supplying China with nickel ore]. We still have a big opportunity to expand in the nickel market. We have relatively a big market to supply our ore,” Bravo said.
Global Ferronickel had been set to raise as much as $600 million from a share sale last year but it shelved the plan in July due to volatile market conditions.
For this year, however, the company said it would pursue its plan of raising some $300 million from a stock offer.
In August, the company bought Southern Palawan Nickel Ventures Inc. for $50 million. That company in turn owns at least 90 percent of Ipilan Nickel Corp., which has a mine in Brookes Point in Palawan.
The company said it will start operating the Palawan mine, which will contribute some 20 to 30 percent of the company’s profits, by November this year.
Global Ferronickel said income in the third quarter last year fell 80 percent to P797 million from the P3.92 billion recorded in the same period in 2014, weighed down by low prices.
It mitigated the low-price environment with a shift in production to more of the middle grade low-iron nickel ore. The strategy hinged on the discovery of a much higher volume of ore after mining the limonite layers exposed more of the type of ore than previously thought, it said.
Total volume of nickel ore sold by the company for the period stood at 2.57 million wet metric tons (WMT), lower by 24 percent than the previous year’s 3.39 million WMT.