Ferronickel export duty hits at Falconbridge

Faced by imposition of an unexpected 25% export duty on shipments of ferronickel from the operations of subsidiary Falconbridge Dominicana C por A in the Dominican Republic, Falconbridge Ltd has halted shipments of the metal from that country. Production continues, however, the company says.

Falconbridge is talking to the Dominican government, a company spokesman tells The Northern Miner, but at presstime no progress had been reported. The company has produced ferronickel in the Carribean country, free of any kind of export duty, since 1972.

Falconbridge Chairman William James describes the new duty as “prohibitive” and says the company “had no recourse but to suspend shipments until the situation is resolved.

About 70 million pounds of nickel in ferronickel are produced annually at the Dominican mine/ mill complex, almost equal to Falconbridge’s nickel output at its Sudbury operations in Ontario.

Shortly after the announcement of the new Dominican government duty, the price of nickel soared to around $3.75(US) a pound, and there’s no doubt, says analyst Ilmar Martens, that the price was driven to a considerable extent, in a tight nickel market, by the imposition of the duty on the Falconbridge product.

Martens, who is president of Nickdata Inc, Toronto, said he wouldn’t care to predict how long the duty might stand. “It looks like a battle between the Dominican Republic government and management,” he said. “The government there evidently wants to get in on profits in the nickel industry.”

Falconbridge Dominicana C por A is held 85% by Falconbridge, and 10% by the Dominican Republic government.

The Falconbridge spokesman says the export duty is tied to the foreign exchange rate between the Dominican Republic’s peso, and the U.S. dollar, and the base rate on which the duty is calculated is four Dominican Republic pesos as equal to one U.S. dollar.

The 25% duty that has been imposed results from the current exchange rate of five Dominican pesos to the U.S. dollar, but, he said, if the Dominican dollar fell to six pesos to the U.S. dollar, the duty would rise to 50%.