Takeover target LionOre Mining International has downgraded its nickel production forecast for calendar year 2007, only a fortnight after reaffirming the target of 44,300 tonnes.
LIM, which is the subject of a multi-billion takeover battle, said yesterday the cut would result from problems and delays at its Maggie Hays mine in Western Australia.
LionOre is Australia's third largest nickel producer behind BHP Billiton and Minara Resources. It says that it now thinks its 2007 nickel output will be around 43,000 tonnes.
"The Maggie Hays sub-level cave operation encountered poor ground conditions during the first quarter of 2007," LionOre told the ASX yesterday.
"A further deterioration in ground conditions has since resulted in a substantial increase in the required rehabilitation program, which will restrict the second quarter 2007 production plan."
Maggie Hays is about 540 kilometres east of Perth and has annual production of about 13,500 tonnes of nickel.
The company said it was looking at options at its other mining operations to see if the lost output can be made up elsewhere.
The nickel miner said Maggie Hays should be back in full swing by the third quarter. LIM said the problems are not expected to cut the expected life-of-mine production for Maggie Hays.
It was a fortnight ago that the company said in its first quarter statement:
"The short-term outlook for the Company's performance is positive, with the trend set over the past two quarters poised to continue, supported by a backdrop of robust commodity prices and LionOre's production growth profile.
"We remain on track to deliver the group's 2007 production target of 44,300 tonnes of payable nickel."
"Group nickel production was solid, despite both the Nkomati MSB mine and Emily Ann nearing the end of their lives.
"The various capital projects implemented last year at Tati and Black Swan are yielding positive results, with Black Swan setting new mining and milling records. Lake Johnston faced some operational issues which affected production; however, measures are being taken to rectify these.
"Nickel in inventory remained at abnormally high levels, increasing from 30 cents per share to 42 cents per share, for the second quarter in a row. We are addressing the logistics of shipping our concentrate more effectively."
LionOre has drawn two suitors: Russian giant, Norilsk Nickel, and Swiss-based mining house, Xstrata, are battling each other in a bid to win control ofthe nickel miner.
Norilsk, which is the world's largest nickel miner, last week topped Xstrata with a $C27.50 per share bid for LionOre, valuing the takeover at $C6.8 billion ($7.7 billion).
That excluded a $C305 million break fee payable to Xstrata should it lose the battle for LIM. Xstrata has extended its bid until Friday night of this week to give it time to reflect.
Norilsk moved into Australia's nickel industry in March through a $520 million takeover of United States metal producer, OM Group.
That gave Norilsk the Cawse mine near Kalgoorlie and 20 per cent of the LionOre subsidiary MPI Mines, which operates the Black Swan nickel mine and owns the Honeymoon Well project, both in WA.
