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Drop in coal price to ease nickel production cost this year, Merdeka Copper says
Merdeka Copper Gold said a drop in coal prices would help improve its financial condition this year, as it makes possible to lower the production cost of nickel processing.
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This undated photo shows the gold mining site of Bumi Suksesindo, a subsidiary of PT Merdeka Copper Gold. (kontan.co.id./Ridwan Mulyana)
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ublicly listed miner PT Merdeka Copper Gold said it expected nickel production costs would slide through this year, following a drop in coal prices that make up one of major components of input costs, which paves the way for the company to see an improvement to its profitability.
Merdeka, which is listed under ticker MDKA, said a decline in coal prices would help ease costs to generate the electricity needed by its rotary kiln electric furnace (RKEF), which it used to extract nickel metal from ore.
The drop is expected to also help ease pressure from high nickel ore costs, which comprise a large portion in the production cost structure and will likely maintain the trend for quite some time.
"Nickel ore price is quite high, as there is a significant demand for high-grade saprolite nickel. The price is going to stay at the current level. It's ultimately based on nickel price. So if nickel price reduces, the nickel ore [price] will also come down," David Thomas Fowler, director at Merdeka Copper Gold, said in a public expose event on Tuesday.
Read also: Two nickel IPOs this month point to downstream industry potential
The miner’s net profit has dropped by 95.8 percent year-on-year (yoy) to US$2.75 million in the first quarter of this year, which the company said was due to higher production costs of nickel pig iron (NPI), one of many results in nickel processing that could be used to produce stainless steel.
In addition, lower sales from its copper and gold mines in Tujuh Bukit and Wetar, as well as insurance claims worth $42 million that were only recognized in Q1 last year, also played a role in its drop in net profit.
