Inco reports slight increase in earnings despite production drop

IDX-listed nickel miner PT International Nickel Indonesia Tbk (PTI) reported on Friday first quarter 2011 net earnings of US$111.9 million or ($0.011 per share), a slight increase compared to US$108.9 million ($0.011 per share) achieved in the fourth quarter of 2010, and 47% above the $76.2 million ($0.008 per share) in first quarter of 2010.

Earnings before interest, taxes, depreciation and amortization (EBITDA) totalled $172.7 million in 1Q11, compared to $170.1 million in 4Q10 and $121.7 million in 1Q10 due to higher average realized prices, partially offset by lower deliveries mainly due to lower production.

The company recorded an average realized price for nickel in matte of $20,246 per metric ton during 1Q11, compared to $18,011 per metric ton in 4Q10.

Sales revenue for 1Q11 was $322.4 million, a slight decrease compared to US$329.2 million in 4Q10. This was mainly due to lower deliveries of nickel in matte.

In 1Q11 deliveries totalled 15,924 metric tons compared to 18,280 metric tons in 4Q10.

Production of nickel in matte in 1Q11 was 16,501 metric tons, a decrease of 8% compared to 17,996 metric tons in 4Q10. Production was mainly impacted by natural events, like the earthquake that took place in Sorowako on February 15th, and lightning storms, the company said. Electrical lines and some facilities were impacted causing a temporary shutdown of production.

The production impact is expected to be compensated throughout 2011.

The company said its Karebbe hydroelectric power generating plant project is progressing very well and is expected to come on line in the second half of 2011. The project will produce enough hydroelectric energy to displace existing oil and diesel use to feed the electric furnaces at the Sorowako facility and it is expected to reduce our cost of energy.

The company plans to spend $232 million on capital expenditures in 2011, in line strategy o achieve an annual production of 90,000 metric tons against the average of 73,000 metric tons in the last five years, an increase of 23%.

?PTI is also consolidating advanced studies for a further production increase distinctly beyond this annual level of 90,000 metric tons over the next few years, ? the company said.

PTI, which is controlled by Brazilian firm Inco Vale, operates a huge nickel mining concession in the southern part of Sulawesi. (alex)