Global Ferronickel Announces 2015 Financial and Operating Results

Makati—(PHStocks)—Global Ferronickel Holdings Inc. (PSE: FNI) today announced its audited financial and operating results for 2015 with net income at PhP1.112 billion compared to PhP4.817 billion reported in 2014. Our operations encountered unusually heavy rainfall during the months of June and August that affected ship loading activities due to the need to reduce moisture content to the desired level of 33%. This brought down total shipments to ninety nine (99) vessels as compared to 117 vessels in the previous year. In addition, the decrease in shipment volume was exacerbated by the decline in nickel ore prices from 2014 average of US$43.30/WMT to US$26.69/WMT average for 2015, lower by US$16.61/WMT or 38.4%.

For 2015, total volume exported was 5.352 million WMT, a 15% drop from 2014 volume of 6.303 million WMT. However, the volume of high grade and medium grade was higher by 279k WMT or 288% and 1,987k WMT or 83%, respectively. The low grade ore exported was lower by 3,217k WMT or 84%. The breakdown of 2015 exports is as follows: 376k WMT (high grade), 4,368k WMT (medium grade) and 608k WMT low grade. This brings total ore export revenues to US$142.94 million in 2015 from US$272.78 million in 2014. The shift in mining strategy was disclosed in the 3Q15 discussion of results with the exposure of the middle grade ore which was higher than previously explored and this helped mitigate the low nickel ore prices.

The cost of sales decreased by 9.1% to PhP3.398 billion in spite of the 15% drop in production volume. However, the company took over the port operations in CAGA 2 which increased the shipping and distribution cost compared to 2014. Also, there was a one-off increase in the depletion expense to PhP284 million because of the change in determining the basis (latest declared mine reserves) of such expense.

The year 2015 was very challenging as commodity prices fell to decade lows. In spite of this, the company has managed to become the second largest nickel ore producer. For 2016, Global Ferronickel will implement cost cutting measures to decrease cost due to low fuel prices. Then, its exploration efforts in Surigao is bearing fruit and the company expects results to be out by end 2Q16. On the other hand, Global Ferronickel’s Ipilan mine in Palawan has moved forward with its permitting process. The company expects the Ipilan mine to start producing within the fourth quarter of 2016 and it will complement the seasonal weather pattern of its Surigao mine providing, the company with a nickel production for the entire year. Global Ferronickel’s Ipilan mine will be a major contributor to its earnings in the future. So when Ipilan comes into operation, this will significantly increase the company’s capacity to match the top producer in total ore export sales.

Finally, in line with the 4.5 million WMT contractual commitment for 2016 by three big Chinese customers that was recently disclosed, the shipment volume for this year would likely be similar to that of 2015. This gives the company the assurance of good results for this year despite a challenging market environment for commodities. Most importantly, the company would remain to be profitable and have strong cash flow because of cost reduction measures and a better mix of higher quality ores.

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