UPDATE 2.40pm: Mirabela Nickel has warned that it may be set to default on its debt covenant after one of its two main customers announced it would terminate its nickel concentrate purchase agreement a year earlier than expected.
Last week Mirabela announced that Brazil's Votorantim Metais Niquel would be closing its nickel smelting facilities because of the weak nickel price and would subsequently terminate its concentrate sales agreement with Mirabela at the end of next month.
Mirabela said today the event might constitute a default under its $US50 million debt facility with Brazilian bank Bradesco, which might in turn trigger a default across a separate $US395 million unsecured note agreement with the bank.
"As required under the Bradesco Facility, Mirabela has provided notice of the potential event of default to Bradesco," Mirabela said in a statement.
"Given that the Bradesco facility and the notes are both governed by New York law, the company is seeking confirmatory legal advice from its US counsel in relation to these matters."
Last week, Mirabela warned nickel prices were continuing to trade below its cashflow break-even position after overheads, financing and capital costs.
It warned of risks to its business, "particularly in the context of the company's debt repayment obligations".
"Given this heightened risk profile, and the fact that nickel prices are forecast to trade below the company's break-even position in 2014, Mirabela intends to continue exploring opportunities for new strategic, financing and off-take alternatives," Mirabela said.
Mirabela has always struggled to turn a profit at its flagship Santa Rita mine in Brazil because of production problems and, more recently, weak nickel prices.Shares in the company were off 0.1 cent, or 7.69 per cent, to 1.2 cents at the close, representing a fresh all-time low.