Cost cutting was the key to FNX Mining’s (FNX-T, FNXMF-O) second- quarter success.
The Toronto-based copper and nickel miner managed to increase its second-quarter profit by 11% from the same period last year and up its earnings to 14¢ per share from 13¢.
Like many companies reporting better than expected earnings this season, FNX made those gains on the back of cost savings, and it remains to be seen if it can find further savings in the third quarter.
One figure that could raise red flags was a dramatic drop in revenue. FNX reported that revenue fell 45% to $61.9 million. Much of that was due to a strike at the Vale (VALE-N) nickel smelter and refinery in Sudbury, Ont.
Still, revenue and earnings were higher than the Street’s expectations, which had pegged revenues at $43.9 million and earnings at just 2¢ a share, according to Reuters estimates.
Beating expectations had a positive effect on the company’s share price.
The day the results were released, its stock was up 5% or 43¢ on just over 1 million shares traded. The company has 87 million shares outstanding.
The company credited its ability to cut costs to its early and “decisive actions” with regards to optimizing its operations. It said strict controls on capital, operating and corporate spending also played a key part.
On the more challenging side of things, FNX continues to look for another facility to process its ore.
The company had been relying on smelting by Vale in Sudbury but a strike there had left FNX with little choice but to stockpile ore.
All ore shipments to Vale were stopped at the end of May and 120,000 tonnes of ore from FNX’s Podolsky and McCreedy West Mines have been stockpiled.
FNX says it has enough working capital to keep stockpiling production into 2010, if required.
In the near term, however, the company announced a deal with Xstrata (XSRAF-O, XTA-L) that will allow FNX to mill up to 150,000 tonnes of its stockpiled ore at Xstrata’s Strathcona mill in Sudbury. The terms of the deal are confidential.
If the labour dispute between Vale and the union is not resolved, FNX said it will try to extend its agreement with Xstrata.
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