Fickle nickel takes its toll on market darling Mirabela – by Sarah-Jane Tasker (The Australian – October 4, 2013)

MIRABELA Nickel once rode the commodities boom, hitting a share price peak of more than $7 in early 2008, but a perfect storm of low prices, debt, decreasing cash balances and a cancelled contract has seen the company join the ranks of the penny dreadfuls. Some 80 per cent has been wiped off the value of its share price in the last month alone — from an already low base.

This is a company that was valued by the market at about $800 million in 2008. Now? $14m. The price of a decent shack on Sydney’s waterfront.

Perth-based Mirabela this week became the latest high-profile casualty of a commodity that has been struggling more than most others.

Perth-based private equity firm Resource Capital Fund is Mirabela’s largest shareholder and is the hardest hit by the share price fall. The resources-focused fund stepped in to support the company last May, tipping in $20m at a share price of 40c, which at the time was at a 17.6 per cent premium to the junior’s share price. It also underwrote a $100m raising. The miner said at the time that the funds would strengthen its balance sheet.

Chief executive Ian Purdy joined the company in November 2009, having previously worked for one of the miner’s major customers, Norilsk Nickel. He, like Mirabela’s share price, has taken a dive.

The company is not commenting beyond its updates to the market over the past week, but its recent notices to the Australian Securities Exchange have painted a stark picture of the sector, with warnings that the challenges facing the industry and the company could have a significant impact on its cashflow and debt repayments.

“Given this heightened risk profile, and the fact that nickel prices are forecast to trade below the company’s break-even position in 2014, Mirabela intends to continue exploring opportunities for new strategic, financing and offtake alternatives,” the company said last week.

As lead researchers Wood Mackenzie have said, the nickel industry in under “severe pressure”.

Steve Hulton, principal mining analyst for Wood Mackenzie, described nickel as the “worst” of all commodities the company had studied.

“In 2012, one-third of industry production generated negative margins after taking into account total cash and sustaining capex costs,” he said.

Mirabela joined the Australian market in July 2004 with a listing price of 20c and it was hailed as a stock to watch, given the size of its Santa Rita nickel sulphide mine in Brazil.

Even before first production in November 2009, it was in favour with investors, and hit a share price high of $7.43 in May 2008. The share price of the junior nickel miner has been in free fall over the past week, and it dipped to a low of 0.8c during trading on Thursday. It recovered ground yesterday and — such are the absurdities of percentages — it can boast a “stunning” 60 per cent rebound yesterday to close the day at 1.6c, up 0.6c.

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