Monsters of Rock: Mincor is seeking ~300pc production lift in second half as nickel prices rise

Mincor expects a strong second half to lift production to 8000-10,000t FY23 guidance
Nickel miner has been clearing its hedge book to take advantage of strong prices
Iron ore miner Mount Gibson impacted by wet Kimberley weather

Kambalda nickel producer Mincor Resources (ASX:MCR) will need to see production lift by at least 300% in the second half of fiscal 2023 to meet its financial year guidance as its WA nickel sulphide operations continue to ramp up.

A key supplier to BHP (ASX:BHP) and its Kambalda nickel concentrator, part of the battery-focused Nickel West division, Mincor saw $20.3m of receipts from its primary customer in the third quarter after processing and freight charges on deliveries up to November.

The total year to date has hit $31.82m, but MCR saw operating losses of $9.65m in the quarter including $12.3m in outflows from the settlement of mandatory hedges with BNP Paribas for 1101t at an out of the money $21,000/t.

Mincor, which still had $85.5m in the bank at December 31 after an oversubscribed $55m share placement, has pledged to ramp up production from its Cassini and North Kambalda operations in the second half.

It has maintained full year guidance of 8000-10,000t of nickel in concentrate, having delivered 1015t in the December quarter and 1943t for the first half of FY23.

The company, which saw the introduction of new MD Gabrielle Iwanow during the quarter, has now delivered 48% of its hedge book with 24% cash settled and only 2443t of future production for 2023 hedged under its mandatory hedging program.

That should see the company take advantage of higher nickel prices, up 44% in Australian dollar terms during the quarter to $44,908/t, almost double the price in MCR’s 2020 DFS.

“Operational ramp-ups always come with their challenges, particularly in a macro environment that has seen significant cost inflation and labour shortages. That said, the team is doing an incredible job to manage these challenges, and we made substantial progress during the quarter,” Iwanow told shareholders.

“Since commencing with Mincor in mid-November, I have focused on building on the excellent work already undertaken to now accelerate our activities and achieve the guidance we have set in the market.”

Nickel prices have been stoked by low inventories and growing use in electric vehicles, along with a well documented short squeeze that has sapped liquidity in the market and kept prices rangebound at high levels.

LME prices fell 1.9% overnight Friday to US$28,902/t, well above historical norms.

Mincor Resources (ASX:MCR) share price today:

Big dogs pull down market as Lynas, Pilbara shine

Lynas Rare Earths (ASX:LYC) was the biggest mover among the large caps, with the NdPr producer rising over 6% on a strong set of quarterly results.

Pilbara Minerals (ASX:PLS) also flew the flag for the lithium crowd, with the materials sector dropping around 0.3% on weak performances from big dogs BHP, Rio Tinto (ASX:RIO) and Fortescue Metals Group (ASX:FMG).

Having a tougher day today is high grade iron ore miner Mt Gibson Iron (ASX:MGX), which says iron ore output for FY23 will be at the lower end of its 3.2-3.7Mwmt sales guidance and cash cost before royalties at the upper end of its $70-75/wmt guidance range.

It comes after extraordinary weather in the Kimberley, which saw some of its worst flooding in its history over the New Years period.

“Site operations have largely continued to plan, although some near-term shipping delays are expected,” the Koolan Island mine owner said.

MGX saw net cash operating outflow of $7m in the quarter, but has $100 million worth of iron ore stockpiles sitting at surface. It saw mining ramp up 10% to 1Mwmt in the December quarter, with sales up 47% to 0.7Mwmt, taking sales for the half year to 1.1Mwmt.

MGX pulled in revenue of $90m for the quarter at an average realised price of $139/t (US$92/t) and cash operating costs of $89/wmt, impacted by interim crushing arrangements after a fire in August resulted in repairs to its processing plant.

“Performance during the December quarter reflected a significant operational and financial improvement on the previous period as we pursued interim crushing arrangements while repairs were advanced in the processing plant following the August fire incident,” MGX CEO Peter Kerr said.

“This has laid the foundations for a stronger second half despite delays to completion of the crusher repair works arising from the impacts on transport logistics of heavy rainfalls and flooding on the Kimberley mainland in late December and early January.

“Mining performance at Koolan Island improved during the quarter with sales of high-grade 65% Fe iron ore increasing from the prior quarter by almost half, and substantial mined ore stockpiles accumulated for processing once plant repairs are completed in the current March quarter.

“Positively, we are also pleased to have seen a steady improvement in iron ore prices since late November as China has moved toward easing its long-standing COVID-19 restrictions and fostering economic growth. Consequently, Mount Gibson looks forward to increasing its shipment rates at higher realised prices in the coming year.”

Also reporting today, Aurelia Metals (ASX:AMI) delivered 21,600oz of gold at all in sustaining costs of $2638/oz, compared to 22,500oz at $2643/oz in the September quarter.

It finished the quarter with $23.7m in the bank (down from $46.5m on September 30) ahead of finalising funding arrangements for its new Federation mine at the end of the March quarter.