Manila, Philippines/ August 16, 2018. Global Ferronickel Holdings, Inc. (FNI) today announced net income of ₱3.98 million for the period January to June 2018 as against ₱151.76 million in the same period last year. Revenue fell by 23.2% year-on-year to ₱1,430.60 million due to the lower prices of nickel ore during the same period in 2017. The average realized nickel ore price for the first six months ended June 30, 2018 is US$17.59 per WMT compared to US$19.44 per WMT during the same period in 2017. Despite the decline in revenues, the Company managed to maintain its gross profit margin at 45%.
Shipment volume decreased by 19% to 1.55 million WMT in the first six months of 2018 from 1.91 million WMT in the same period last year. The decrease in shipment volume was due to the Company’s decision to shift its focus towards higher-grade nickel ores that required more preparation, especially in anticipation of such shipments for the second half of the year, in order to maximize profitability.
“It is the first time in the past several years that we are pushing for shipment of higher-grade nickel ores with 1.65% nickel content to take advantage of its relatively high price with better margin,” said FNI President Atty. Dante R. Bravo. “Despite a very challenging first half of the year, measures to boost operational efficiency and our ability to adapt to the changing market conditions continue to enable us to achieve positive results.”
The resulting product mix of 43% low-grade ore and 57% medium-grade ore in 2018 versus the previous years’ mix of 63% and 37% respectively, led to an average revenue per vessel of ₱51 million, which is just 4% lower compared to the same period in 2017.
The Company’s total cash operating cost per unit slightly improved by 3% year-on-year, notwithstanding the increase in excise tax on minerals that took effect on January 1, 2018, which doubled its rate from 2% to 4% of gross revenue. The improvement in operating costs is mainly attributable to the reduction in royalty and contractor rates that were renegotiated in the 2nd quarter of 2018. Another favorable factor that impacted the bottom line is the US dollar appreciation over the Philippine peso.
In the first quarter of 2018, Platinum Group Metals Corporation (PGMC),the Company’s
operating arm in Surigao del Norte, signed supply contracts for the delivery of a total of
4.6 million WMT to Guangdong Century Tsingshan Nickel Industry Co. Ltd., Baosteel
Resources International Co. Ltd., and Baiyin International Investment Ltd., which
represent about 84% of its revised target shipment volume of 5.5 million WMT in 2018.
Mining higher-grade nickel ore entails more processing activities which results in lower
volume of shipment but would yield to higher average realized margin.