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Australia's Minara put off expansion due to costs

LONDON, Aug 7 (Reuters) - Australia's Minara Resources Ltd (MRE.AX , 1.490, +0, +0%) said on Thursday it had to defer its Australian $300 million ($273.5 million) nickel expansion plan due to high costs and reported an 80 percent drop in profits for the first half year. Minara, Australia's second-largest nickel miner after BHP Billiton Ltd/Plc (

BHP.AX BHP.AX , 37.190, +0, +0%), posted a net profit after tax for the half year to 30 June 2008 of $50.9 Australian million, down from $245.9 Australian million in the same period in 2007.

"As a result of the current cost pressures, major capital project expenditure directly related to the heap leach expansion has been deferred," the company said in a statement.

An expansion, increasing the firm's annual output of nickel by around 8,000 to 10,000 tonnes per year by the end of 2009, had to be postponed due to the rising costs facing the company.

Minara said it had experienced a range of cost pressures including escalating prices of inputs such as sulphur and gas during the first half of this year, a 30 percent decline in the nickel price and a very strong Australian dollar.

"Minara is proactively engaged in reducing costs and is focused on optimising production in a volatile nickel market," said Peter Johnston, managing director and CEO.

An explosion at an Apache-owned gas plant on June 3 knocked out about a third of the gas supplies to industrial users in the key mining region of Western Australia, hitting output of nickel, gold, alumina and other raw materials needed in mining.

"The Murrin Murrin plant was non-operational for five days and operated at half to two thirds capacity for the remainder of the month of June," the statement said.

Full production resumed in early July and the output guidance of between 31,000 tonnes and 35,000 remains unchanged.

Output at Murrin Murrin, Minara holds 60 percent and Glencore International owns the rest, for the first six months was 15,022 tonnes of nickel and 999 tonnes of cobalt packaged.

(Reporting by Anna Stablum, editing by Michael Roddy)

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