Timmins Nickel cuts loss as operating costs decline

Despite a substantial drop in the price of its main commodity, Timmins Nickel (TSE) has boosted annual operating profits by 73%.

For the 12 months ended May 31, the small producer sold 2.8 million lb. of nickel at an average price of US$3.89 per lb., compared with 1.4 million lb. at US$5.02 last year. Operating costs dropped from US$4.69 to US$3.17. The improved performance cut the company’s annual losses from $414,000 last year to $233,000 in 1990-91.

Timmins Nickel plans to spend some of its cash flow on exploration. With the appointment of Charles Michener, Inco Ltd.’s former vice-president of exploration, as a director of Timmins Nickel, it will launch a $1-million program to investigate the Shaw Dome region near Timmins, Ont., this fall. Along with annual results, the company announced it had boosted possible reserves down to 3,500 ft. at the Redstone mine by 1.4 million tons grading 2.5% nickel. And an independent review of the Dumont deposit has established probable reserves of 536 million tons grading 0.36% nickel, a substantial increase from a previously reported estimate of 400 million tons at 0.34% nickel.

But in the fourth quarter, Timmins Nickel showed some weakness. Lower grades at the Redstone mine and startup problems at the Carshaw mill lowered throughput and led to a drop in nickel sales. For the three months ended May 31, operating costs, at US$3.92 per lb., roughly equalled the company’s average realized price per pound.

Since then, mill throughput has increased from 200 tons per day to 500 tons per day, and mill operating problems have been “substantially” resolved, the company says.

For the next fiscal year, management expects nickel sales to reach eight million pounds, assuming Timmins Nickel exercises its option on BHP Utah Mines’ 49% interest in the Redstone mine.

Under the option agreement, Timmins must pay BHP $1.8 million on or before Oct. 31, 1991. On closing, Timmins must also pay BHP for its share of working capital less its share of profits earned between July 1 and the closing date. BHP will retain a 1% net smelter return (NSR) royalty on ore produced from Redstone after July 1, 1993, and a 2% NSR on ore produced from any new mines on the property.