The Nickel Mines Ltd (ASX: NIC) share price has started the week deep in the red.
In morning trade, the nickel producer's shares have fallen 6% to $1.01.
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Why is the Nickel Mines share price sinking?
The Nickel Mines share price has come under pressure today amid concerns that the company could be negatively impacted by tax changes in Indonesia.
An announcement notes that on Friday, the Indonesian Investment Minister was reported as suggesting that Indonesia is exploring the possibility of levying an export tax on nickel products with less than 70% nickel content.
However, it also highlights that the reported comments were made without prior consultation with other Indonesian Government Ministries. This includes the ministry which would be responsible for the introduction of such a tax, the Ministry of Energy and Natural Resources (MEMR).
Furthermore, it points out that any contemplated export tax must be submitted in draft to the Cabinet Secretary for review and eventual Presidential approval before it can be finalised and issued by the relevant Minister.
As a result, the proposal would be required to follow this process, and only after a lengthy period of discussion and industry consultation.
Though, based on the Nickel Mines share price, it seems that some investors believe the changes could happen and weigh on its margins.
Management commentary
Nickel Mines' Managing Director Justin Werner doesn't appear overly concerned with the speculation.
Particularly given the company's strong domestic sales and its ability to create product with nickel content greater than 70%.
He said: "Whilst we do not currently believe the rumoured export tax to be the planned policy of the Government, it is worth noting that at present, approximately 50% of the Company's NPI production is sold within the IMIP (in-country)."
"The Company also has an MoU for two of its RKEF lines to undergo conversion to allow the production of nickel matte which can be processed within the IMIP to a grade of greater than 75%. The Company expects to enjoy an exceptionally strong 2H2021 on the back of record NPI prices and strengthening EBITDA margins," he added.
