Atlas unit defers full-scale operations to second half

MANILA, Philippines - Atlas Consolidated and Mining Corp. subsidiary Berong Nickel Corp. has pushed back to the second half of this year the state of full-scale mining operations following its failure to increase its supply contract with BHP Billiton.

In a disclosure to the Philippine Stock Exchange, BNC reported that negotiations to increase its sales volume to BHP to around one million tons per year were unsuccessful. The company said BHP agreed to procure only 400,000 tons of nickel laterite ore this year.

Half of this could be supplied from existing stockpile, making the need to start full scale mining operations not so urgent, BNC said.

The company’s production and shipping volumes for 2008 amounted to 476,850 tons, 53,000 tons less than in 2007. BNC said this was due to extreme wet weather conditions during the first half of 2008 and the depressed state of the Chinese laterite market last year.

BNC noted that the Chinese market for laterite ore declined in the fourth quarter of 2008 and is expected to remain depressed well into 2009.

However, BNC reported that its operating performance has been good and has even shown continued improvement quarter on quarter.

BNC pointed out that it is insulated from the Chinese market by its BHP/QNI ore supply contract, which covers up to 500,000 tons per annum of nickel laterite ore until 2013, with an option to extend the contract for another five years up to 2018.

The first shipment for BHP, BNC said, is scheduled for April 2009, with monthly shipments thereafter.

With more than enough stocks to meet the initial shipments to BHP, BNC said that all production activity at Berong has ceased for the time being, with a consequent significant reduction in manning and site costs.

BNC now has less than 50 people employed at its Berong mine site after having laid off 600 employees and contractual workers.

BNC explained that it was forced to do the lay offs for the long-term viability of its operations. It, however, continued to provide essential community services, including operation of the water treatment plant, a medical facility and supply of teachers and educational scholarships.