For personal use only

Transcription

1 ABN Unaudited Condensed Consolidated Interim Financial Report For the three and nine months ended September 30, 2012 Expressed in thousands of US dollars () unless otherwise stated

2 CONTENTS UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENT OF INCOME AND COMPREHENSIVE INCOME 3 UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY 4 UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION 6 UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOW 7 NOTES TO UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL REPORT 8 2

3 MIRABELA NICKEL LIMITED Unaudited condensed consolidated interim statement of income and comprehensive income For the three and nine months ended September 30, 2012 Three months ended Nine months ended Sep 30, 2012 Sep 30, 2011 Sep 30, 2012 Sep 30, 2011 Note Sales revenue 7 97,393 75, , ,888 Treatment, refining and transport charges (20,157) (15,194) (53,870) (38,240) Net sales revenue 77,236 60, , ,648 Direct costs (50,057) (51,437) (157,328) (137,433) Royalties (3,710) (4,162) (11,304) (11,733) Depreciation, amortisation and depletion (15,544) (12,657) (51,916) (35,652) Cost of sales (69,311) (68,256) (220,548) (184,818) Gross profit/(loss) 7,925 (8,124) (9,609) (24,170) Expenses General and administration (3,368) (2,223) (10,197) (6,613) Financial income 8 2, ,690 2,776 Financial expense 8 (10,947) (10,170) (32,541) (29,467) Net derivative gain Net foreign exchange gain/(loss) 4,860 12,428 (8,570) 20,297 Other expenses (1,697) (1,178) (4,902) (8,733) (8,442) (294) (51,520) (21,491) Loss before income tax (517) (8,418) (61,129) (45,661) Income tax Loss for the period (517) (8,418) (61,129) (45,661) OTHER COMPREHENSIVE INCOME/(EXPENSE) Foreign currency translation differences (7,245) (157,421) (63,036) (115,691) Effective portion of changes in fair value of cash flow hedges 63,392 76,169 Net change in fair value of cash flow hedges transferred to profit or loss (2,601) 22,581 Other comprehensive expense for the period (6,476) (93,580) (65,637) (16,941) Total comprehensive expense for the period (6,993) (101,998) (126,766) (62,602) LOSS PER SHARE Basic loss per share ($ per share) (0.001) (0.017) (0.091) (0.092) Diluted loss per share ($ per share) (0.001) (0.017) (0.091) (0.092) Weighted basic average number of shares outstanding (000 s) 883, , , ,633 Weighted diluted average number of shares outstanding (000 s) 883, , , ,633 The accompanying condensed notes form part of this unaudited condensed consolidated interim financial report. 3

4 MIRABELA NICKEL LIMITED Unaudited condensed consolidated interim statement of changes in equity For the nine months ended September 30, 2012 Attributable to equity holders of the Group Period ended Issued capital Translation reserve Share based payments reserve Hedging reserve Accumulated losses Total equity September 30, 2012 Note Balance at January 1, ,108 (47,906) 6,742 (12,761) (103,673) 525,510 TOTAL COMPREHENSIVE INCOME/ (EXPENSE) FOR THE PERIOD Loss for the period (61,129) (61,129) Other comprehensive expense Foreign currency translation differences (63,036) (63,036) Net change in fair value of cash flow hedges transferred to profit or loss 12 (2,601) (2,601) Total other comprehensive expense (63,036) (2,601) (65,637) Total comprehensive expense for the period (63,036) (2,601) (61,129) (126,766) TRANSACTIONS WITH EQUITY HOLDERS Shares issued during the period net of issue cost 114, ,002 Performance rights converted to shares (1,707) 1,707 Share based payment transactions 1,121 1,121 Options lapsed during the period (438) 438 Total transactions with equity holders 114,002 (1,024) 2, ,123 Balance at September 30, ,110 (110,942) 5,718 (15,362) (162,657) 513,867 The accompanying condensed notes form part of this unaudited condensed consolidated interim financial report. 4

5 MIRABELA NICKEL LIMITED Unaudited condensed consolidated interim statement of changes in equity For the nine months ended September 30, 2012 Attributable to equity holders of the Group Period ended Issued capital Translation reserve Share based payments reserve Hedging reserve Accumulated losses Total equity September 30, 2011 Note Balance at January 1, ,272 86,808 13,180 (101,024) (60,901) 619,335 TOTAL COMPREHENSIVE INCOME/ (EXPENSE) FOR THE PERIOD Loss for the period (45,661) (45,661) Other comprehensive income/ (expense) Foreign currency translation differences (115,691) (115,691) Effective portion of changes in fair value of cash flow hedges 76,169 76,169 Net change in fair value of cash flow hedges transferred to profit or loss 12 22,581 22,581 Total other comprehensive income (115,691) 98,750 (16,941) Total comprehensive income/(expense) for the period (115,691) 98,750 (45,661) (62,602) TRANSACTIONS WITH EQUITY HOLDERS Share issue costs recovery Options lapsed during the period (7,016) 7,016 Shares issued on exercise of performance rights 425 (425) Share based payment transactions 1,449 1,449 Total transactions with equity holders 1,229 (5,992) 7,016 2,253 Balance at September 30, ,501 (28,883) 7,188 (2,274) (99,546) 558,986 The accompanying condensed notes form part of this unaudited condensed consolidated interim financial report. 5

6 MIRABELA NICKEL LIMITED Unaudited condensed consolidated interim statement of financial position As at September 30, 2012 Sep 30, 2012 Dec 31, 2011 Note ASSETS Cash and cash equivalents 160,192 61,198 Trade and other receivables 10 57,800 59,371 Inventories 11 65,504 64,056 Total current assets 283, ,625 Trade and other receivables 10 5,134 14,550 Property, plant and equipment , ,346 Exploration and evaluation assets 13 3, Total non current assets 749, ,372 Total assets 1,033,085 1,015,997 LIABILITIES Trade and other payables 15 52,362 68,985 Provisions 16 6,576 3,835 Borrowings 17 34,564 8,433 Provision for current tax 4,597 Total current liabilities 93,502 85,850 Provisions 16 8,792 10,870 Borrowings , ,767 Total non current liabilities 425, ,637 Total liabilities 519, ,487 Net assets 513, ,510 EQUITY Contributed equity , ,108 Reserves (120,586) (53,925) Accumulated losses (162,657) (103,673) Total equity 513, ,510 The accompanying condensed notes form part of this unaudited condensed consolidated interim financial report. 6

7 MIRABELA NICKEL LIMITED Unaudited condensed consolidated interim statement of cash flow For the three and nine months ended September 30, 2012 Three months ended Sep 30, 2012 Sep 30, 2011 Nine months ended Sep 30, 2012 Sep 30, 2011 Note CASH FLOWS FROM OPERATING ACTIVITIES Cash receipts from customers 62,599 74, , ,572 Cash paid to suppliers and employees (60,484) (59,440) (237,073) (232,701) Interest received 2, ,690 2,776 Net cash from/(used in) operating activities 4,825 15,767 (4,448) (20,353) CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of property, plant and equipment (6,253) (29,389) (36,501) (74,168) Payment for exploration and evaluation expenditure (544) (2,900) (5) Net cash used in investing activities (6,797) (29,389) (39,401) (74,173) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from the issue of share capital 119,521 Share issue costs (238) (5,519) Proceeds from borrowings 55, ,000 Repayment of borrowings (2,776) (2,300) (7,636) (228,872) Borrowing costs paid (20,476) Hedge collateral (25,000) Release of hedge collateral 25,000 25,000 Proceeds from close out of foreign exchange hedges 25,793 Payment on closeout of nickel and copper call options & interest rate swap 9 (42,105) Interest paid (2,084) (250) (19,907) (15,593) Net cash (used in)/from financing activities (5,098) 22, , ,747 Net (decrease)/increase in cash and cash equivalents (7,070) 8,828 97,810 19,221 Cash and cash equivalents at beginning of the period 166, ,073 61, ,134 Effect of changes in foreign currency 902 (9,904) 1,184 (4,358) Cash and cash equivalents at end of the period 160, , , ,997 The accompanying condensed notes form part of this unaudited condensed consolidated interim financial report. 7

8 MIRABELA NICKEL LIMITED Notes to unaudited condensed consolidated interim financial report For the three and nine months ended September 30, REPORTING ENTITY Mirabela Nickel Limited (the Company) is a company domiciled in Australia. The address of the Company s registered office is Level 21, Allendale Square, 77 St Georges Terrace, Perth, WA The unaudited condensed consolidated interim financial report of the Company for the nine months ended September 30, 2012 comprises the Company and its subsidiaries (together referred to as the Group ). The Group is primarily involved in the production, development and exploration of mineral properties in Brazil. 2. BASIS OF PREPARATION (a) Statement of compliance This unaudited condensed consolidated interim financial report is a general purpose financial report which has been prepared in accordance with AASB 134: Interim Financial Reporting, IAS 34: Interim Financial Reporting and the Corporations Act The unaudited condensed consolidated interim financial report does not include all of the information required for a full annual financial report, and should be read in conjunction with the consolidated annual financial report as at and for the financial year ended December 31, The unaudited condensed consolidated interim financial report was approved by the Audit Committee on behalf of the Board of Directors on November 14, (b) Basis of measurement The unaudited condensed consolidated interim financial report has been prepared on the historical cost basis except for the following which are measured at fair value: Derivative financial instruments; and Share based payments arrangements The methods used to measure fair values are discussed further in the consolidated annual financial report as at and for the financial year ended December 31, (c) Functional and presentation currency The unaudited condensed consolidated interim financial report is presented in US dollars (US$), which is the Group s presentation currency. The Company s functional currency is Australian dollars (A$) and the functional currency of the Company s foreign subsidiary is Brazilian Real (R$). The functional currency of each of the Group s entities is measured using the currency of the primary economic environment in which that entity operates. The Group is of a kind referred to in ASIC Class Order 98/100 dated July 10, 1998 and in accordance with that Class Order, amounts in the financial report have been rounded off to the nearest thousand dollars, unless otherwise stated. (d) Financial position The Group held cash on hand and on deposit as at September 30, 2012 of $ million. As at September 30, 2012 the Group had a net working capital surplus of $ million. For the nine months ended September 30, 2012 the Group incurred a loss of $ million and had a net operating cash outflow of $4.448 million. As at September 30, 2012 the Group held net assets of $ million. 8

9 MIRABELA NICKEL LIMITED Notes to unaudited condensed consolidated interim financial report For the three and nine months ended September 30, 2012 The Directors consider the going concern basis of preparation to be appropriate based on forecast cash flows. The meeting of the cash flow forecast depends upon the successful operation of mining and production activities in accordance with the budget and achievement of nickel price and foreign exchange assumptions. 3. SIGNIFICANT ACCOUNTING POLICIES The accounting policies applied by the Group in this unaudited condensed consolidated interim financial report are consistent with those applied by the Group in its consolidated annual financial report as at and for the financial year ended December 31, USE OF ESTIMATES AND JUDGEMENTS The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected. In particular, information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amount recognised in the financial statements are described in the following notes: revenue recognition measurement of share based payments accounting for income tax property, plant and equipment, including determination of reserves and resources provision for mine closure and restoration valuation of financial instruments While management believe the estimates and assumptions to be reasonable, actual future results may vary significantly. The significant judgements made by management in applying the Company s accounting policies and the key sources of estimation uncertainty are consistent with those applied to the consolidated annual financial report as at and for the financial year ended December 31, FINANCIAL RISK MANAGEMENT The Group s financial risk management objectives and policies are consistent with those disclosed in the consolidated annual financial report as at and for the financial year ended December 31,

10 MIRABELA NICKEL LIMITED Notes to unaudited condensed consolidated interim financial report For the three and nine months ended September 30, SEGMENT REPORTING During the financial period, Mirabela Nickel Limited operated in one business and operating segment, mineral exploration and development, and in one primary geographical area, Brazil, with two customers: Customer Sector Group Base Metals Principal Activities Mining of nickel, copper, cobalt and platinum in Brazil The accounting policies applied for internal reporting purposes are consistent with those applied in preparation of this financial report. Information on the reportable segments of the Group Three months ended Sep 30, 2012 Sep 30, 2011 Nine months ended Sep 30, 2012 Sep 30, 2011 Net Revenue Group Production 77,236 60, , ,648 Total net revenue 77,236 60, , ,648 EBITDA (a) 20,101 2,310 32,110 4,869 Depreciation, amortisation and depletion (15,544) (12,657) (51,916) (35,652) EBIT (b) 4,557 (10,347) (19,806) (30,783) Net financial expense (8,237) (9,321) (27,851) (26,691) Net derivative gain 249 Net foreign exchange gain/(loss) 4,860 12,428 (8,570) 20,297 Other expenses (1,697) (1,178) (4,902) (8,733) Loss before taxation (517) (8,418) (61,129) (45,661) Capital expenditure 6,797 29,389 39,401 74,173 Total assets 1,033,085 1,054,324 1,033,085 1,054,324 Total liabilities 519, , , ,338 Net assets 513, , , ,986 (a) EBITDA is EBIT, before depreciation, amortisation and depletion. (b) EBIT is earnings before net financial expense, net derivative loss, net foreign exchange gain, taxation and other expenses. 10

11 MIRABELA NICKEL LIMITED Notes to unaudited condensed consolidated interim financial report For the three and nine months ended September 30, SALES REVENUE Three months ended Sep 30, 2012 Sep 30, 2011 Nine months ended Sep 30, 2012 Sep 30, 2011 Nickel Sales 85,380 65, , ,616 Copper Sales 9,120 7,503 26,746 21,241 Cobalt Sales 1,101 1,112 3,170 3,098 Other Sales 1,792 1,411 4,057 3,933 Sales Revenue 97,393 75, , ,888 Nickel Sales are comprised as follows: Three months ended Sep 30, 2012 Sep 30, 2011 Nine months ended Sep 30, 2012 Sep 30, 2011 Realised nickel sales 69,050 76, , ,391 Revaluation of unrealised nickel sales 16,610 (5,787) 16,344 (16,710) Unwinding of metal and foreign exchange forward contracts designated as hedges (280) (5,151) 3,436 (37,065) Nickel Sales 85,380 65, , ,616 Realised nickel sales for the three and nine month period ended September 30, 2012 comprised 5,381 tonnes and 14,323 tonnes of nickel in concentrate respectively (three and nine month period ended September 30, 2011: 4,228 tonnes and 10,220 tonnes), 89% being payable at an average realised nickel price of 6.54/Ib and 7.51/lb respectively; (three and nine months ended September 30, 2011: $9.19/lb and $11.19/lb). Revaluation of unrealised nickel sales comprise of forward price and foreign exchange rate revaluations on unfinalised sales as at the period end. In accordance with the Group s off take agreements, all sales are initially recognised using a provisional sales price, being the average LME price of the month prior to the month of sale, and the exchange rate on the date of sale. Adjustments to the sales price and the exchange rate subsequently occur based on movements in quoted market prices and exchange rates up to the date of final pricing. Adjustments are also made to the sales volume upon finalisation of assays as per the Group s offtake agreements. The period between provisional invoicing and final pricing is typically between two to four months. Accordingly, the fair value of the final sales price and the exchange rate adjustments is re estimated continuously and changes in the fair value are recognised as an adjustment to revenue. For revaluation purposes fair value is estimated using the forward LME price of the second month after the month of the provisional sale and the exchange rate as at period end. During the year ended December 31, 2011 the Group terminated all of its outstanding Metal and Foreign exchange forward contracts designated as hedges. The ineffective portion of the termination costs relating to these hedges were recognised as an expense and the effective portion were recognised in the hedge reserve. This hedge reserve unwinds to revenue upon realisation of the underlying hedge transactions (refer note 12). 11

12 MIRABELA NICKEL LIMITED Notes to unaudited condensed consolidated interim financial report For the three and nine months ended September 30, FINANCIAL INCOME/(EXPENSE) Three months ended Sep 30, 2012 Sep 30, 2011 Nine months ended Sep 30, 2012 Sep 30, 2011 Interest received 2, ,690 2,776 Financial income 2, ,690 2,776 Interest expense (10,720) (9,943) (31,840) (28,647) Discounting of rehabilitation costs (227) (227) (701) (820) Financial expense (10,947) (10,170) (32,541) (29,467) 9. NET DERIVATIVE GAIN/(LOSS) THROUGH PROFIT OR LOSS Three months ended Sep 30, 2012 Sep 30, 2011 Nine months ended Sep 30, 2012 Sep 30, 2011 Derivative gain option (a) 1,027 Derivative gain 1,027 Call option loss (b) (549) Interest rate swap loss (c) (229) Derivative loss (778) Net derivative gain 249 a) Derivative options Under the Norilsk Loan Agreement, Norilsk had an option to convert up to $ million of the $ million loan into ordinary shares of Mirabela Nickel Limited at a price of $8.00 per share, expiring on December 31, The options were cancelled pursuant to the repayment of the loan on April 20, During the period ended September 30, 2011 a gain of $1.027 million was recorded in the statement of income and comprehensive income. b) Metal call options The Group terminated its nickel and copper call options of $ million on April 20, 2011, at an additional loss of $0.549 million which was recorded in the statement of income and comprehensive income during the period ended September 30, (c) Interest rate swap The Group terminated its interest rate swap of $4.155 million on April 20, 2011, at an additional loss of $0.229 million which is recorded in the statement of income and comprehensive income during the period ended September 30,

13 MIRABELA NICKEL LIMITED Notes to unaudited condensed consolidated interim financial report For the three and nine months ended September 30, TRADE AND OTHER RECEIVABLES Sep 30, 2012 Dec 31, 2011 Current asset Trade receivables 35,001 25,976 Prepayments 22,799 33,395 57,800 59,371 Non current asset Other receivables 1,871 2,563 Prepayments 3,263 11,987 5,134 14,550 Prepayments for the period ended September 30, 2012 comprise payments in advance for consumables, plant and equipment not yet delivered. Current and non current prepayments also include recoverable Brazilian federal and state taxes arising from the construction and commissioning stages of the Santa Rita operation and operating expenses payment. It is anticipated that these taxes will be offset against future federal and state taxes payable and are classified into current and non current based on their expected period of recovery. 11. INVENTORIES Sep 30, 2012 Dec 31, 2011 Broken ore cost 25,195 26,298 Concentrate cost 2,795 10,524 Stores, spares and consumables cost 37,514 27,234 65,504 64,056 Stores, spares and consumables represent materials and supplies consumed in the production process. All stocks have been calculated as the lower of cost and net realisable value, with net realisable value for broken ore stocks and concentrate representing the estimated selling price in the ordinary course of business less any further costs expected to be incurred in respect of such disposal. 12. DERIVATIVE FINANCIAL INSTRUMENTS DESIGNATED AS HEDGES During the year ended December 31, 2011 the Group terminated all of its outstanding Metal and Foreign exchange forward contracts designated as hedges. The ineffective portion of the termination costs relating to these hedges were recognised as an expense and the effective portion were recognised in the hedge reserve, which unwinds to revenue upon realisation of the underlying hedge transactions. The foreign exchange forward contracts were terminated on April 20, 2011 and the fair value of $ million was realised in cash through the statement of financial position. As at September 30, 2012 the Group had no derivative financial instruments (December 31, 2011: Nil). 13

14 MIRABELA NICKEL LIMITED Notes to unaudited condensed consolidated interim financial report For the three and nine months ended September 30, 2012 Net unwind/change in fair value of cash flow hedges transferred to profit or loss: Unwind Fair Value Sep 30, 2012 Sep 30, 2011 Nickel and Copper forward contracts 2,586 37,586 Foreign exchange forward contracts (5,187) (15,005) (2,601) 22, EXPLORATION AND EVALUATION EXPENDITURE Sep 30, 2012 Dec 31, 2011 Balance at the beginning of the period Expenditure incurred during the period 2,900 5 Effect of movements in foreign exchange (89) (79) Balance at the period end 3, The recoverability of the carrying amounts of exploration and evaluation assets is dependent upon the successful development and commercial exploitation or sale of the respective area of interest. 14. PROPERTY, PLANT & EQUIPMENT September 30, 2012 Plant & equipment Leased Assets Land Mine properties (a) Construction & development expenditure in progress Total Cost Balance at January 1, ,951 35,045 12, ,063 3, ,457 Additions 17,142 7,521 11,838 36,501 Transfers 14,152 (14,152) Effect of movement in exchange rates (37,220) (2,672) (940) (31,403) (56) (72,291) Balance at September 30, ,025 32,373 11, , ,667 Depreciation Balance at January 1, 2012 (60,302) (13,472) (20,337) (94,111) Depreciation charge for the period (32,934) (4,482) (12,989) (50,405) Effect of movement in exchange rates 7,108 1,369 2,540 11,017 Balance at September 30, 2012 (86,128) (16,585) (30,786) (133,499) Net book value at September 30, ,897 15,788 11, , ,168 The Company has identified impairment indicators, including declining nickel prices and a reduction in market capitalization. Accordingly, the Company has conducted an impairment test on the carrying value of its 14

15 MIRABELA NICKEL LIMITED Notes to unaudited condensed consolidated interim financial report For the three and nine months ended September 30, 2012 property, plant and equipment. The impairment test has indicated that the carrying value of the property, plant and equipment is covered when considering both the open pit operations and future underground operations. The key assumptions in determining the recoverable amount of the Company include: Nickel and copper prices the Company uses consensus views from market participants. The Company notes that nickel and copper price forecasts have been volatile over the past years and may fluctuate significantly; Foreign exchange rates for Brazilian Real to USD the Company uses consensus views from market participants. The Company notes that foreign exchange rates have been volatile over the past years and may fluctuate significantly; Open Pit Operations the Open Pit has been modelled based upon the NI Technical Report prepared by Coffey Mining Pty Limited during March 2011, adjusted for consensus nickel and copper prices and foreign exchange rates; Underground Operations The future underground operation has been modelled based upon the original scoping study prepared during 2009 and further updated with recent mining and costing data provided by independent consultants during October Assumptions relating to underground mining used within the Impairment Model are consistent with the scoping study, apart from commodity and exchange rates, which are based on consensus market data. The scoping study was prepared to examine the economics of mining the Santa Rita underground resource; and Pre tax discount rate of 13.1%. December 31, 2011 Plant & equipment Leased Asset Land Mine properties (a) Construction & development expenditure in progress Total Cost Balance at January 1, ,055 39,454 13, , ,224 Additions 13,964 24,511 58,066 96,541 Rehabilitation asset life of mine adjustment (1,797) (1,797) Reversal of rehabilitation asset accrual (985) (985) Transfers 56,324 (7,816) (48,508) Effect of movement in exchange rates (50,392) (4,409) (1,551) (51,687) (6,487) (114,526) Balance at December 31, ,951 35,045 12, ,063 3, ,457 Depreciation Balance at January 1, 2011 (31,605) (6,694) (9,304) (47,603) Depreciation charge for the year (37,320) (8,473) (13,588) (59,381) Effect of movement in exchange rates 8,623 1,695 2,555 12,873 Balance at December 31, 2011 (60,302) (13,472) (20,337) (94,111) Net book value at December 31, ,649 21,573 12, ,726 3, ,346 (a) Mine properties include deferred stripping costs of $ million (December 31, 2011: $ million) 15

16 MIRABELA NICKEL LIMITED Notes to unaudited condensed consolidated interim financial report For the three and nine months ended September 30, TRADE AND OTHER PAYABLES Sep 30, 2012 Dec 31, 2011 Trade payables 25,207 42,896 Other payables and accrued expenses 27,155 26,089 52,362 68,985 Other payables and accrued expenses mainly comprise interest on the senior unsecured notes, royalties on commodity sales and Brazilian federal and state taxes. 16. PROVISIONS Sep 30, 2012 Dec 31, 2011 Current liability Provision for annual leave 4,670 3,835 Other provision current 1,906 6,576 3,835 Non current liability Provision for rehabilitation 8,640 8,639 Other provision non current 152 2,231 8,792 10,870 Reconciliation of movements in provisions Annual leave provision Balance at beginning of period 3,835 3,680 Net provision made during the financial period 1, Effect of movements in foreign exchange (258) (395) Balance at period end 4,670 3,835 Other provision current Balance at beginning of period Provision transferred from other provision non current 1,906 Balance at period end 1,906 Rehabilitation provision Balance at beginning of period 8,639 11,627 Accretion expense 701 1,031 Life of mine adjustment asset (1,797) Reversal of provision (985) Effect of movements in foreign exchange (700) (1,237) Balance at period end 8,640 8,639 Other provision non current Balance at beginning of period 2,231 2,778 Provision transferred to current liabilities (1,906) Provision reversed during the financial period (237) Effect of movements in foreign exchange (173) (310) Balance at period end 152 2,231 16

17 MIRABELA NICKEL LIMITED Notes to unaudited condensed consolidated interim financial report For the three and nine months ended September 30, 2012 The rehabilitation provision is an estimate of the value of future costs for dismantling, demobilisation, remediation and ongoing treatment and monitoring of the Santa Rita operation. The Group uses third parties to estimate these costs. The estimate will be reviewed over time as the operation develops. The unwinding of the effect of discounting on the provision is recognised as a finance cost. In addition, the rehabilitation obligation has been recognised as an asset and will be amortised over the life of the mine. Other provisions non current include indirect taxes payable which are not repayable in the next 12 months. 17. BORROWINGS September 30, 2012 Senior unsecured notes (i) Caterpillar finance lease facility (ii) Bradesco loan (iii) Atlas Copco finance lease facility (iv) Total COF + LIBOR % Nominal Interest Rate 2.75% 6.00% + LIBOR 6.00% Loan Term 2011 to to to to 2015 Carrying Value 378,667 19,138 50,000 3, ,488 Current borrowings 8,091 25,000 1,473 34,564 Non current borrowings 378,667 11,047 25,000 2, , ,667 19,138 50,000 3, ,488 December 31, 2011 Senior unsecured notes (i) Caterpillar finance lease facility (ii) Nominal Interest Rate 8.75% COF + LIBOR % Loan Term 2011 to to 2014 Total Carrying Value 377,001 25, ,200 Current borrowings 8,433 8,433 Non current borrowings 377,001 16, , ,001 25, ,200 (i) $ million of 8.75% senior unsecured notes due 2018 were issued in the International and United States Rule 144A debt capital markets during April The notes are guaranteed by Mirabela Investments Pty Ltd and Mirabela Mineração do Brasil Ltda. Interest on the notes will be payable semi annually in arrears on April 15 and October 15 of each year during the term of the notes. Borrowing costs of $ million to secure this funding have been offset against the principal borrowings amount and are amortised using the effective interest rate method. Effective interest for the period relating to the capitalised borrowing costs was $2.177 million. (ii) The $ million master funding and leasing agreement is for the purpose of lease financing of up to 90% of the purchase price of Caterpillar mobile equipment. The facility was drawn down to US$ million as at September 30, 2012, with $ million outstanding after repayments. Further drawdown under the leasing facility will require approval from Caterpillar prior to the drawdown. The Company does not intend to drawdown further on this facility. Lease payments under the facility are calculated on the basis of a 60 17

18 MIRABELA NICKEL LIMITED Notes to unaudited condensed consolidated interim financial report For the three and nine months ended September 30, 2012 month term, and include interest determined at the date of the particular funding request as the prevailing 3 month US$ LIBOR rate plus COF plus 2.75% per annum (weighted average interest rate of 4.54%). (iii) During January 2012, the Company s Brazilian subsidiary, Mirabela Mineração Ltda, entered into a $ million; 35 month working capital facility with Banco Bradesco S.A. Principal is repayable in instalments, being 50% in month 12, and the remainder in equal instalments in months 24, 30 and 35. Interest is payable bi annually at a rate of LIBOR plus 6%. The loan is unsubordinated and secured by a Guarantee from Mirabela Nickel Ltd and a fiduciary assignment on the Votorantim receivables. This facility was drawn down in March (iv) The Company entered in a $5.200 million 36 month financing facility with Atlas Copco Customer Finance during January 2012, to finance four DML drill rigs. Down payment of $0.780 million was made at commencement of the facility, with the remaining principal repayable in six semi annual equal instalments (plus interest at a fixed rate of 6%) commencing July CONTRIBUTED EQUITY Movement in share capital for the nine months ended September 30, 2012 Ordinary shares Number of shares Issue price US$ January 1, 2012 Opening balance 491,781, ,108,327 February 2, 2012 Shares issued on conversion of performance rights (Issued at A$1.84) (a) 734,926 April 18, 2012 Shares issued on conversion of performance rights (Issued at A$1.84) (a) 123,427 May 17, 2012 Issue of ordinary shares fully paid (issued at A$0.40) (b) 50,000,000 US$ ,908,000 May 29, 2012 Issue of ordinary shares fully paid (issued at A$0.30) (c) 183,637,836 US$ ,837,931 May 29, 2012 Issue of ordinary shares fully paid (issued at C$0.30) (c) 82,277,147 US$ ,478,541 June 5, 2012 Issue of ordinary shares fully paid (issued at A$0.30) (d) 13,691,530 US$0.30 4,102,015 June 12, 2012 Issue of ordinary shares fully paid (issued at A$0.30) (e) 39,560,413 US$ ,854,238 June 12, 2012 Issue of ordinary shares fully paid (issued at C$0.30) (e) 14,765,129 US$0.30 4,340,115 September 28, 2012 Shares issued on conversion of performance rights (Issued at A$1.84) (a) 11,091 September 30, 2012 Closing balance 876,582, ,629,167 Less: Share issue cost current period (5,518,851) 876,582, ,110,316 (a) Performance rights converted to shares not for cash; (b) These shares were issued to Resource Capital Fund V L.P. under the A$0.40 per share strategic placement; (c) These shares were issued to institutional investors under the A$0.30 per share institutional entitlement offer; (d) These shares were issued to retail investors under the A$0.30 per share retail entitlement offer; (e) These shares were issued to institutional investors as part of the shortfall under the A$0.30 per share retail entitlement offer. 18

19 MIRABELA NICKEL LIMITED Notes to unaudited condensed consolidated interim financial report For the three and nine months ended September 30, 2012 Movement in share capital for the nine months ended September 30, 2011 Ordinary shares Number of shares Issue price US$ January 1, 2011 Opening balance 491,561, ,271,793 July 4, 2011 Shares issued on conversion of performance rights 220,000 US$ ,024 (Issued at A$1.84) September 30, 2011 Closing balance 491,561, ,696,817 Add: Share issue costs recovery current period (a) 804, ,561, , 500,901 (a) An independent review was undertaken on the ability to claim Goods and Service Tax on prior financial periods share issue cost. Unissued Shares under Performance Rights at September 30, 2012 Number of Vesting date Performance Rights December 31, ,358 December 31, ,623,652 December 31, ,847 Balance 2,144,857 Unissued Shares under Performance Rights at December 31, 2011 Number of Vesting date Performance Rights December 31, ,215 December 31, ,608 June 30, ,608 December 31, ,848 December 31, ,847 Balance 2,216,126 During the nine months ended September 30, 2012, the following occurred in accordance with the Company s Performance Rights Plan: 1,418,821 performance rights were granted by the Company under Cycle 2; 620,646 performance rights previously granted by the Company under Cycle 1 and Cycle 2 lapsed; and 869,444 performance rights were converted to shares. 19

20 MIRABELA NICKEL LIMITED Notes to unaudited condensed consolidated interim financial report For the three and nine months ended September 30, 2012 The terms and conditions of performance rights under Cycle 2 are as follows: Cycle 2 Terms and Conditions Performance condition Deliver operational optimisation goals for 2012 Deliver agreed growth goals for 2012 Company s share price against group of peer companies for 2012 Market or non market based Non Market Non Market Market Underlying spot price A$0.99 A$0.99 A$0.54 Exercise price $0.00 $0.00 $0.00 Valuation date Feb 9, 2012 Feb 9, 2012 Feb 9, 2012 Vesting date Dec 31, 2013 Dec 31, 2013 Dec 31, 2013 Vesting period (Days) Number of rights 487, , ,826 Valuation per right A$0.99 A$0.99 A$0.54 Valuation per performance condition A$482,225 A$321,482 A$438,386 Entitled number of employees The terms and conditions of performance rights under Cycle 3 are as follows: Cycle 3 Terms and Conditions Performance condition Yet to be determined Yet to be determined Market or non market based Non Market Market Underlying spot provisional price A$0.43 A$0.43 Exercise price $0.00 $0.00 Provisional Valuation date September 30, 2012 September 30, 2012 Vesting date December 31, 2014 December 31, 2014 Vesting period (Days) Number of rights 169, ,423 Provisional valuation per right A$0.43 A$0.43 Valuation per performance condition A$72,852 A$72,851 Entitled number of employees 1 1 As the performance conditions for cycle 3 have not been set at the date of this report, the fair value of these performance rights has been measured provisionally. Unissued Shares under Options at September 30, 2012 Exercise Price A$ Exercise Price US$ Expiry Date Number of Options A$3.00 US$3.12 Jul 7, ,000,000 A$3.00 US$3.12 Jul 7, ,000 A$3.00 US$3.12 Jun 30, ,000 Balance 4,150,000 20

21 MIRABELA NICKEL LIMITED Notes to unaudited condensed consolidated interim financial report For the three and nine months ended September 30, 2012 Unissued Shares under Options at December 31, 2011 Exercise Price Exercise Price Number of A$ US$ Expiry Date Options A$6.20 US$6.32 Sep 11, ,000 A$3.00 US$3.06 Jul 7, ,000,000 A$3.00 US$3.06 Jul 7, ,000 A$3.00 US$3.06 Jun 30, ,000 Balance 4,450,000 During the period ended September 30, 2012 a total of 300,000 options at an exercise price of US$6.44 were not exercised at the expiry date and have lapsed. 19. CAPITAL AND OTHER COMMITMENTS Sep 30, 2012 Dec 31, 2011 Operating lease commitments Non cancellable operating lease rentals: Within one year One year or later and no later than five years 1,597 2,186 2,452 2,990 Exploration expenditure commitments Commitments for rental fees under exploration licence agreements: Within one year 2,530 6,152 2,530 6,152 Contractual, capital and operating commitments Contracted but not provided for and payable: Within one year 64, ,540 One year or later and no later than five years 68,232 70,605 Greater than five years 7, , , SHARE BASED PAYMENTS During the three and nine months ended September 30, 2012, the Company recognised an employee share based payment expense of $0.466 million and $1.121 million respectively (three and nine months ended September 30, 2011: $0.348 million and $1.449 million). 21. RELATED PARTIES Key management personnel receive compensation in the form of short term employee benefits, postemployment benefits and share based payment awards. Key management personnel received total compensation of $1.168 million and $3.152 million for the three and nine months ended September 30, 2012 (three and nine months ended September 30, 2011: $0.929 million and $3.038 million). 21

22 MIRABELA NICKEL LIMITED Notes to unaudited condensed consolidated interim financial report For the three and nine months ended September 30, 2012 Transactions with key management personnel Key management personnel, or their related parties, hold positions in other entities that result in them having control or significant influence over the financial or operating policies of those entities. These entities may enter into transactions with the Company or its subsidiaries. The terms and conditions of such transactions are no more favourable than those available, or which might reasonably be expected to be available, to non director related entities dealing at arm s length with the Company. During the nine months ended September 30, 2012 there were no transactions between the Company and the key management personnel or their related parties. During the three and nine months ended September 30, 2011 the company was invoiced by Verona Capital Pty Ltd $Nil and $0.028 million for the recovery of shared overheads. The company charged Verona Capital Pty Ltd a total of $Nil and $0.064 million for office rent and shared overheads. Verona Capital Pty Ltd was a director related entity associated with Mr Craig Burton who resigned and ceased to be Non executive Chairman and Director of the Company on January 1, During the three and nine months ended September 30, 2011 the Company charged $Nil and $0.005 million to Nearfield Resources Limited, for shared overhead and premises rent costs. Nearfield Resources Limited was a director related entity associated with Mr Craig Burton who resigned and ceased to be Non executive Chairman and Director of the Company on January 1, SUBSEQUENT EVENTS During October 2012 the Company announced a significant increase in Resources after the successful open pit extension drilling program which was completed during the second quarter. The revised remaining Resources as at September 30, 2012 increased to % nickel (Measured, Indicated) and 79.6 nickel (Inferred). The current mine life of 22 years is based solely on the previously stated Reserves of % nickel and 0.14% copper as at the end of December 2010 and a mine rate of 7.2 Mtpa of ore. 22

23 All amounts in thousands of US dollars (US$ 000) unless otherwise stated INTRODUCTION The following management discussion and analysis ( MD&A ) of Mirabela Nickel Limited, including its subsidiaries, ( Mirabela, the Company or the Group ) is for the three and nine month periods ended September 30, 2012 and should be read in conjunction with the unaudited condensed consolidated interim financial statements for the same period, and the notes thereto. The effective date of this report is November 14, The Company s annual financial statements, interim financial statements and the financial information contained in this MD&A were prepared in accordance with International Financial Reporting Standards ( IFRS ). THE COMPANY Mirabela is an international mineral resource company engaged in the mining, production and sale of nickel concentrate. The ordinary shares of Mirabela are listed on the Toronto Stock Exchange under the symbol MNB and on the Australian Securities Exchange under the symbol MBN. Mirabela's principal asset is the 100% owned Santa Rita nickel sulphide, open pit operation in Bahia State, Brazil, discovered by Mirabela in 2004 and brought into commercial production in Mirabela also has a portfolio of prospective nickel targets in Brazil, including an underground mineral resource at Santa Rita. OVERALL PERFORMANCE & SELECTED ANNUAL INFORMATION Financial Statistics Three months ended Nine months ended Sep 30, 2012 Sep 30, 2011 Sep 30, 2012 Sep 30, 2011 Sales revenue 97,393 75, , ,888 Net sales revenue 77,236 60, , ,648 Cost of sales (69,311) (68,256) (220,548) (184,818) Gross loss 7,925 (8,124) (9,609) (24,170) Loss for the period (517) (8,418) (61,129) (45,661) EBITDA (1) 20,101 2,310 32,110 4,869 Basic loss per share ($0.001) ($0.017) ($0.091) ($0.092) Diluted loss per share ($0.001) ($0.017) ($0.091) ($0.092) Dividends Paid Total assets 1,033,085 1,054,324 1,033,085 1,054,324 Total non current liabilities 425, , , ,830 Total liabilities 519, , , ,338 Net assets 513, , , ,986 1

24 Three months ended Nine months ended Production Statistics Measure Sep 30, 2012 Sep 30, 2011 Sep 30, 2012 Sep 30, 2011 Mining Total Material Mined Tonnes 8,947,179 10,435,162 29,707,870 28,597,291 Ore Mined Tonnes 1,748,416 1,693,049 5,026,397 3,963,599 Nickel Grade % Processing Total Ore Processed Tonnes 1,798,040 1,441,399 4,781,097 3,806,316 Nickel Grade % Copper Grade % Cobalt Grade % Nickel Recovery % Copper Recovery % Cobalt Recovery % Production Nickel in Concentrate Produced DMT 5,441 4,605 13,962 10,825 Copper in Concentrate Produced DMT 1,704 1,368 4,351 3,375 Cobalt in Concentrate Produced DMT Sales Nickel in Concentrate Sold (2) DMT 5,381 4,228 14,323 10,220 Copper in Concentrate Sold (2) DMT 1,780 1,262 4,799 3,192 Cobalt in Concentrate Sold (2) DMT Three months ended Nine months ended Unit Cash Costs Measure Sep 30, 2012 Sep 30, 2011 Sep 30, 2012 Sep 30, 2011 Payable Nickel Production (3) lbs 10,675,850 9,035,318 27,395,915 21,240,380 Production Costs Mining Cost USD/lb Processing Costs USD/lb Administration Cost USD/lb Subtotal USD/lb Selling Costs Transport/Shipping Cost USD/lb By Product Credit (4) USD/lb (1.17) (1.21) (1.27) (1.37) Smelter Charges USD/lb Subtotal USD/lb Unit Cash Cost USD/lb Unit Royalty Cost USD/lb Realised Nickel Price (4) USD/lb Realised Copper Price (4) USD/lb Realised Cobalt Price (4) USD/lb Average Real/US$ Exchange Rate (1) EBITDA is defined as earnings before net financial expense, net derivative loss, net foreign exchange gain, taxation, other expenses, depreciation, amortisation and depletion. See Non GAAP Measures (2) Includes sales volume adjustments upon finalisation of assays (3) Average payability of 89% (4) Includes prior period QP adjustments and excludes hedge accounting 2

25 RESULTS OF OPERATIONS THREE MONTHS ENDED SEPTEMBER 30, 2012 OPERATING REVIEW Mirabela has completed a record third quarter with a second consecutive significant reduction in C1 unit cash costs and a step change increase in production post the completion of the processing plant upgrade construction program. The mine and processing plant are now running at full capacity. The Company completed its Resource estimation showing a substantial increase in Resources on the back of the successful open pit extension exploration drilling programme completed during Q2. SAFETY Mirabela s safety performance included two lost time injuries during the quarter. The Company s safety performance remains strong with the 12 month moving average Lost Time Injury Frequency Rate closing the quarter at 0.82, improving from 0.96 at the end of Q Mirabela is continuing to target further improvements to this strong safety record through ongoing safety training and safety improvement programmes. MINING Total material movement continues to be in line with the mine plan and processing plant feed requirements, with 8.9 million tonnes of material moved for 1.7 million tonnes of ore. Mined grades improved from 0.50% during the second quarter to an average of 0.52% during the third quarter, in line with expectations. Mining activity for the quarter continued to be predominantly in the central zone of the pit with good reconciliation between mined grades and the new resource model. The integrated mine, plant and maintenance rolling six week mine plans are now fully operational and support the full year production guidance. Loader and Excavator availabilities continue to remain the key focus area for operational improvement. Disciplined planned maintenance programs are continuing on all excavators and loading equipment to reduce backlogs and increase the proportion of planned maintenance hours on a sustainable basis. Steady improvements in excavators and loader availabilities are expected over the next two quarters. The drilling and truck mobile fleets performed to expectation. PROCESSING During the quarter 1.8 million tonnes of ore was milled, at an average head grade of 0.52% nickel and achieving an average recovery of 59%. Recovery performance remains in line with the grade recovery algorithm and the quality of ore presented to the plant. The recovery optimisation test work underway in the laboratory, pilot plant and industrial trials is focusing on improving the flotation of the coarse material fraction, with promising results achieved in the laboratory and pilot plant test work completed to date. The desliming plant was fully operational for most of the third quarter and continues to stabilise operations, recoveries and product qualities, as well as significantly reducing reagent costs. Several planned and unplanned On/Off tests conducted on the desliming plant reinforced the benefit of the plant with lower global recoveries achieved without desliming in all the tests conducted. During September a maintenance fire originated within the 20 inch cyclone bank of the desliming circuit, resulting in a four day unplanned shutdown. 3

26 SALE OF CONCENTRATE During the quarter Mirabela produced 5,441 tonnes of contained nickel in concentrate, 1,704 tonnes of contained copper in concentrate, and 96 tonnes of contained cobalt in concentrate. 5,381 tonnes of nickel in concentrate was sold to Mirabela s off take partners, Votorantim Metais Niquel S.A. and Norilsk Nickel, an increase of 12% from Q Two export shipments to Norilsk Nickel were completed during the quarter, with two further shipments to Norilsk Nickel expected during the fourth quarter. Steady deliveries to Votorantim continued throughout the quarter. OUTLOOK Mirabela remains on track to achieve towards the lower end of the production guidance of between 19,000 to 21,000 tonnes of nickel in concentrate for Capital expenditure is within the full year guidance of US$60 million, with US$41 million spent year to date. EXPLORATION (Refer Competent Person Statement at the end of the MD&A) The successful completion of the Open Pit extension drilling program completed during Q2 has resulted in a significant increase in Resources. The revised remaining Resources as at the 30th September 2012 increased to % nickel (Measured, Indicated) and % nickel (Inferred), as presented in the table below. The current mine life of 22 years is based solely on the previously stated Reserves of % nickel and 0.14% copper as at the end of December 2010 and a mine rate of 7.2 Mtpa of ore. SANTA RITA DEPOSIT Resources Table Remaining as of the End of September 2012 Pit Classification Tonnes (million) Nickel grade (%) Copper grade (%) Open Pit 1, 2 Measured Indicated Sub Total Open Pit 1, 2 Inferred Underground 3, 4 Inferred Based on a cut off grade of 0.13% recoverable nickel. 2 Remaining as of end of September, Based on an average cut off grade of 0.50% nickel. 4 As of February 2009, re reported using revised base of pit in October The completion of the latest resource update is based on recent deeper drilling under the northern zone of Santa Rita, (14 holes for 9,540 metres); a re interpretation of geology and structure for the entire deposit; and use of Ordinary Kriging for the Block Model, (with no Change of Support applied). The largest increases occurred in the Indicated and Inferred classifications where Resources increased approximately 32 Mt and 54 Mt respectively. The Underground Inferred Resources decreased by approximately 10 Mt due to some of the Underground Inferred Resource being included within the updated pit shell. The additional drilling brings the total amount of resource drilling specifically for Santa Rita to 675 holes for 190,660 metres. 4