Ban Phuc Nickel Mines Limited Liability Company (BPNM) has just requested support from the government to reduce its refined nickel ore export tariff from 20 to 10 per cent to sustain production.
After being licensed in December 2007, BPNM envisioned starting production in mid-2009.
However, due to low market demand the project halted construction in 2008 to await better market conditions.
The project finally started its mining and processing activities from May 2013.
Ban Phuc was reportedly the only nickel project of its kind in Vietnam in a period that the mineral’s mining and processing is a new industry to the country. But its operations are severely challenged at current.
In a recent letter en route to the Vietnamese government, BPNM general director Evan Spencer clearly states that pure nickel metal has seen a nosedive in price on the global market leading to the a decline in the ore export price.
In 2008, when the project started construction, raw nickel fetched $28,890 per tonne. It slipped to a mere $19,640 per tonne in 2012 and experienced a further plunge to just $13,216 at present.
Given this, forecasts by global nickel research groups, such as BMO from Canada or Australia’s Macquarie nickel metal and ores look poor for 2014 and 2015.
Meanwhile, taxes and associated fees in Vietnam are high and account for 32 per cent of a company’s revenue, said Spencer.
This includes 20 per cent export duties, 20 per cent environmental fees, and other associated fees.
BPNM executives said the nickel business in Vietnam is taxed even higher than in Laos where it is 5 per cent export duty on ores and claimed that only operating costs would be covered after taxes.
Estimates show that in late 2013 refined nickel ores fetched $1,256 per tonne on the world market, whereas the company’s production cost jumped to $1,309 per tonne after paying taxes and fees.
“Any company would inevitably sustain losses at such levels. Therefore, we had to cut down production,” said Spencer.
BPNM estimated that at the current export duty of 20 per cent, the company would lose nearly $20 million in 2014 alone, despite cost-cutting measures commensurate with tumbling metal prices.
BPNM even considered the possibility of closing the mining site late this May if it did not receive support in a timely manner, said a company source.
By the end of November 2013, BPNM has produced and exported 10,503 tonnes of refined nickel ores with a concentration averaging 9.5 per cent.
At that time, the company paid VND81 billion ($3.8 million) in taxes to the state budget, including VND 44.3 billion ($2.1 million) in export duties and VND20.2 billion ($960,000) in personal income tax.
If the project sustained production this year, it would contribute over VND300 billion ($14.2 million) to state coffers.
Asian Mineral Resources Limited (AMR) is a global mining group listed on the bourse in Toronto, Canada. It is the developer of the Ban Phuc Nickel project, 160km northwest of Hanoi in Son La province.
The foreign partner holds a 90 per cent stake in BPNM, whereas the remaining 10 per cent is held by local partner Son La Mechanical Engineering JSC.
By Thanh Huong
Ban Phuc Nickel requesting support to continue operations Related image(s)
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