Marketing & Hedging

Marketing

Mincor has a long term off-take agreement with BHP Billiton.  In terms of this agreement, BHP Billiton toll treats Mincor’s ore at the Kambalda Nickel Operations Plant, and purchases the resulting concentrate.

The precise commercial terms of the Off-take Agreement are confidential, but are based on industry standard conditions for such agreements.

The effect of the Off-take Agreement is to provide Mincor with long term marketing certainty.  It also removes much of the risk associated with concentrate production (plant recoveries, unforeseen plant down-time, etc).

Hedging

In line with its strategy of maintaining maximum exposure to the nickel price while securing a minimum level of protection against adverse price movements, Mincor's policy is to protect its cash cost of production through forward sales of nickel metal over a rolling two year period, provided such forward sales do not exceed 30% of forecast production.

As at 30 June 2008, Mincor had sold forward a total of 2,450 tonnes of payable nickel metal to May 2010, at an average price of A$35,854 per tonne.  This represents less than 11% of Mincor's expected production over that period.

This hedging is distributed as follows: 

• Jul 2008 to Dec 2008 - 125 tonnes of payable nickel per month at a price of A$32,671/tonne
• Jan 2009 to Jun 2009 - 115 tonnes of payable nickel per month at a price of A$38,342/tonne
• Jul 2009 to Dec 2009 - 115 tonnes of nickel per month at a price of A$36,982/tonne
• Jan 2010 to May 2010 - 64 tonnes of nickel per month at a price of A$35,522/tonne