Update I: PT Inco nickel output up in Q2, sees 2006 output down

Canadian nickel miner Inco Limited reported Wednesday its Indonesian subsidiary PT International Nickel Indonesia (PT Inco) produced 39 million pounds of nickel-in-matte during the second quarter of 2006, an increase of 8.3 percent compared to the same quarter last year.

Inco Limited said PT Inco, however, would not be able to recover 8-9 million pounds of lost production in the second half of the year following fire that caught the transformer of one of the four furnaces in May.

Net income declined to US$ 79.7 million, or 8 cents a share, in the quarter ended in June 30 from $98.9 million, or 9 cents, in last year period.

Sales fell 1.8 percent to $258.6 million, 15 percent lower than the same period last year.

Production costs soared 38 percent to $3.11 per pound of nickel produced due to fuel price hikes. The company?s cash balance stood at $170.4 million by the end of June quarter compared to $239.2 million in the same period last year.

PT Inco has lowered its 2006 production target from 167 million pounds of nickel-in-mate to between 158 and 159 pounds of nickel-in-mate.

PT Inco produced 164 million pounds last year.

Inco Limited has 61 percent shares in PT Inco, a publicly-listed nickel miner that operates a nickel mining complex in Sorowako, South Sulawesi.(denny)