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PHL to mine nickel until yearend with El Niño help

Posted on August 03, 2015

PHILIPPINE nickel miners, hit by a slump in prices, may have found an unexpected ally in the El Niño.

A woman arranges ore for display at a mining conference in a hotel in Pasay City in this Oct. 14, 2008 photo. -- BW File Photo
They are betting the dryness linked to the weather event will let them mine until yearend instead of typically shutting due to seasonal rains.

This is in contrast to agricultural producers who fear the scorching weather will hurt crops such as rice, corn and palm oil.

For the Philippine nickel sector, the top ore supplier to No.1 consumer China, it could however be a blessing. All-year-round production, and as a result exports, would boost earnings for the country’s miners, which have been hit by a recent slump in nickel prices to six-year lows amid bulging world stocks.

“The impact of El Niño on our operations is going to be positive,” said Emmanuel L. Samson, chief financial officer of top miner Nickel Asia Corp.

“The dry weather means our mines can continue to be productive in October or November when the season of heavy rains usually starts.”

The wet season typically stretches from October to early next year, making it impossible for nickel mines to operate.

This year Nickel Asia, partly owned by Japan’s Sumitomo Metal Mining 5713.T, expects ore exports to hit a record of over 19 million wet metric tons (WMT), versus 17.9 million WMT in 2014, Samson said.

Lower January-June rains have already helped it ship 9.68 million WMT over the period, up 25% on year.

Exports should stay firm as the El Niño keeps rains at bay. There is a growing consensus for a stronger El Niño, marked by droughts in parts of Asia, including the Philippines that is home to 27 nickel mines.

Mr. Samson shrugged off worries about the dryness curbing hydropower, saying Nickel Asia has its own source of electricity to run its two processing plants, the only ones in the country.

For most miners, the main concern now is the price slump.

Nickel stocked in London Metal Exchange-approved warehouses nearly doubled in 18 months to record highs above 470,000 tons in June, driving London prices down 27% this year.

This and weak demand forced Philippine miner Agata Mining Ventures, partly owned by Canada’s TVI Pacific, Inc., to cancel planned shipments in May.

Agata, however, is optimistic it can operate in the last quarter and offset the cancellation.

The country’s no. 3 ore producer Global Ferronickel Holdings, Inc. is also upbeat the dry weather will keep its mine open. It expects to ship a record 6-7 million WMT this year.

The miners are pinning their hopes on a pick up in Chinese demand.

Philippines accounted for almost all of China’s nickel ores and concentrate imports in the first half.

China’s nickel imports in the first five months were lower than consensus, but its nickel pig iron (NPI) producers will likely ramp up purchases in the coming months, Maybank analysts said.

“We think NPI producers will eventually have to cover for the reduction in inventory.” -- Reuters