Singapore 21/07/2016 - Philippines largest nickel miner Nickel Asia Corp (NAC) said nickel ore stockpile shipments from Manicani island may be halted but has downplayed the impact in such a situation.
NAC's subsidiary Hinautan Mining Corp (HMC), which owns its Manicani mine, has not received any orders to suspend operations, NAC said in response to media reports that the Philippine government has ordered a halt to its operation at and nickel ore stockpiles shipments from the island.
The mine has been on care-and-maintenance status since mining operations halted in the late-1990s.
“There is therefore no operation to suspend and the only activity that may be halted is the disposal and removal of the stockpiles,” NAC said in a filing on the Philippine stock exchange on Thursday.
Philippine mining minister Regina Lopez has asked NAC to stop shipping nickel ore from Manicani to China after its mining audit found that too much soil was taken from the Manicani hauling operations, Reuters reported on Wednesday. NAC was reported to have stockpiled some 1.4 million tonnes of nickel ore from past mining at the island.
NAC noted that the stockpile shipped from Manicani was only 100,000 wet metric tonnes in the first half of this year, compared to the one million wmt shipped out by HMC – which has other operations other than in Manicani - and the 8.5 million wmt shipped out in total by all NAC subsidiaries.
Therefore, any suspension in the stockpile disposal activities in Manicani will not materially affect the company’s overall financials, it added.
NAC had said earlier this week that it plans to step up shipments of its limonite ore to China this year to make up for the drop in shipments in the first half of the year. NAC’s four operations - Taganito, Rio Tuba, Hinatuan and Cagdianao - sold 8.54 million wmt of nickel ore in January-June, down 11.8 percent from a year ago due to a prolonged rainy season.
NAC’s stockpiles at Manicani are mostly low-grade limonite ore which were not saleable during the time when mining was conducted in the late 1990s, but they are now saleable given current market conditions - China has increased its acceptance of low-grade ore in recent years after Indonesia banned the export of its unprocessed ore.
Market participants are concerned that a month-long mining review being conducted by the Philippines government could see more disruptions to domestic mining and to nickel exports from the country.
The Philippines is the only major supplier of nickel ore to the Chinese nickel pig iron industry and adherence to strict new environmental laws in the Philippines puts at risk nearly a quarter of the world’s nickel mine supply, said ANZ Research in a report on Thursday.
While Chinese nickel ore port stocks are estimated to still have two-months' worth of consumption, the country needs to stockpile nickel ore around six-month worth of usage from the Philippines in the coming months before the rainy season at the latter starts and hampers mining and transportation. The rainy season typically starts from late in the year till March the following year.
The supply of medium-grade nickel ore has become tighter in China, but there is so far sufficient supply of low-grade material, a Beijing-based nickel ore trader told FastMarkets.
This latest threat to nickel mine supply comes just as the market moves into deficit – data from the World Bureau of Metal Statistics showed nickel market deficit expanded to 42,600 tonnes in January-May, from 8,800 tonnes in the first four months of the year.
The likelihood of the Philippine nickel industry being completely shut down is low, but the amount and importance of supply at risk warrants a substantial premium, said ANZ.
“As such, we expect nickel prices to push towards $12,000 per tonne,” the bank added. “Any surge above $12,000 will be dependent not only on further mine closures in the Philippines, but also on continued growth demand in China.”
The London Metal Exchange three-month nickel price reached as high as $10,700 on Thursday – the highest since 12 October 2015. It was last at $10,645, up $65 from the previous day’s close.