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Tagged with: Panoramic Resources

Aug 2008 - Panoramic Res

Panoramic Resources Limited (PAN) – Establishing a Company with a life of 10 to 15 years producing ~15,000tpa to 20,000tpa Nickel, that has Significant Upside Potential

  • With both Lanfranchi (LNM)’s Deacon and Kimberley (KNM)’s renamed Savannah orebody both open at depth and growing in width and on strike, the renamed Panoramic Resources appears to have the capability of establishing a company with a life of at least 10 to 15 years, producing ~15,000tpa to 20,000tpa Nickel.
  • The orebody at Savannah appears to be significantly changing and improving at depth with higher widths (possibly >30m thick), different nickel mineralisation styles, and often higher grades (nickel, copper and cobalt) than the Upper Zone of the orebody. Which could result in production of ~0.9mtpa from Savannah alone, a longer life, and at higher grades.
  • The potential size of Savannah has been aided by the delineation of the Northern Ore Zone at the western end of Savannah making a T-bone shape with the Main Zone, which increases the potential strike length of the Lower Zone (there was a non-JORC resource of up to ~80,000tNi in the Lower Zone [below the 500 fault]).
  • Savannah currently receives significant by-product credits of ~A$4.00/lb to A$4.20/lb, which should increase with the higher copper grades towards the west and at depth, especially if KNM also needs to produce a copper concentrate.
  • There is also significant exploration upside potential at Lanfranchi, based on a number of target areas to be EM tested, plus the possibility of replication under the northern dome, having established a “hangingwall” position of ~2m @ 7%Ni.

Oct 2008 - Panoramic Res

BUY Panoramic (PAN)

  • Our last commissioned report was on Panoramic, rating it a BUY at $2.37 on 1 August 2008, and we again recommended it as a BUY in our post Diggers Comment at A$1.45 on 11 September and it has continued to fall along with most of the resource stocks currently to ~A$1.12 per share, and given the state of the market may fall further from 7 October 2008.
  • However, we continue to rate PAN as a BUY.......................WHY ?, well :
  • At A$1.12 per share, PAN appears to have a fully franked dividend yield of 10% (or in other words about double what you get for money on deposit in an Australian bank [and bank rates are expected to fall]). The current 7.5%pa (less the bank fees, which for this example we have ignored) becomes an equivalent 5.25%pa after paying 30% tax (placing it on the same comparable basis as a fully franked yield).
  • If PAN’s share price falls further from here ($1.12), then you should get an even higher dividend yield.
  • That dividend yield is based on PAN paying 11Ac to 12Ac this year to June 2009, and according to our estimates, it should be achievable, even if nickel falls to US$6/lb. PAN has paid 12c per year for the past 2 years (the first 12c was a maiden final for the year to June 2007, and in the year to June 2008 PAN paid a 7c interim followed by a 5c final). Last years’ 12c was a 43% payout ratio based on earnings of 28.4c (DH07 : $24.4m, 13.7c eps: JH08 : $29.9M, 15.5c eps).
  • Our August 2008 estimate for the year to June 2009 was an eps of 39c, based on US$9/lbNi and a US95c exchange rate or A$9.47/lbNi, whereas at current prices of nickel at US$6.87/lbNi and the A$ at 77.5USc, PAN is receiving A$8.86/lbNi, which results in an eps of 39.6c in 08/09 and 43.1c in 09/10, and 40c at a 40% payout ratio = 16c (and an NPV of $2.45).
  • If the nickel price fell to US$6/lb (as some major brokers believe), and assuming an unchanged exchange rate of 77.5USc, then PAN’s 08/09 eps becomes 32c or at a ~40% payout possibly ~ 12c to 13c in dividends.

Jul 2009 - Panoramic Res

Panoramic Resources Limited (PAN) –Significantly reducing costs and capex by up to $40mpa while growing beyond 20,000tpaNi

  • In some ways, the lower nickel price has been beneficial to Panoramic, because it caused the company to have a complete review of its cost and capex expectations for 2008/9. Combined with the across the board 10% reduction in all employees’ salaries, Panoramic encouraged its contractors to do the same, which has resulted in reductions of A$1m-$2m per month on each mine (totalling ~$40mpa).
  • Panoramic’s 20,000tpaNi target may be achieved in the coming year. PAN’s forecast is up to 19,000tNi, but it really depends on what average grades come from the keel zone of Lanfranchi’s Deacon as individual grades there range up to ~11%Ni. In fact if Deacon averages ~4%Ni in one of the months in mid-2010, Lanfranchi could be producing at an annualised rate of 20,000tpaNi for that month.
  • The ~50,000tNi resource delineation of the Lower Orebody at Savannah has extended the mine life to at least 10 years based on treating 700,000tpa (~70m vertical per year) at 1.3% to 1.4%Ni for ~8,000tpa Ni (with material copper and cobalt credits). That takes PAN’s production beyond 20,000tpaNi from mid-2011.
  • Savannah appears to have been sub-horizontally injected & hence horizontally domained, so its orebody changes with depth as in the latest drillhole intersection in the Deeps covering ~10m of Ni mineralisation including ~3.3m of solid massive (Kambalda-looking) nickel ore grading an ERA expected ~ >= 2% to 3%Ni.
  • Aside from Savannah’s nickel production increasing due to higher nickel grades at depth, its production could increase by ~10% to >750,000tpa following the expected receipt of 2 spare 50t trucks from Lanfranchi (surplus due to the new six-wheeled 60t trucks), and the planned purchase of a new 60t truck for Savannah.
  • The nickel and A$/US$ exchange rate hedging undertaken by PAN has been extremely astute, resulting in significantly higher cashflows to PAN, such as the recent (MQ09) US$70m puts at US$73c paid for with US$70m calls at US$56c.

Jul 2010 - Panoramic Res

Panoramic Resources Limited (PAN) – Settling into a Production Range ~19,000tpaNi

  • Accepting that production in FY2010 was lower than expected, and having given guidance for FY2011 of 18,000t to 19,000tNi, Panoramic appears to be settling into a nickel production range of ~18,500tpaNi to 19,500tpaNi or ~19,000tpaNi as shown in our/ERA production scenario forecast.
  • Lanfranchi could produce more tonnage (given it was producing at ~80,000tpm on the day of our visit, applying a revised sub-level stoping method), and grades could be higher as the mine moves into the higher grade keel zone of Deacon, while Savannah’s grades may also be higher.
  • Although Deacon remains open at depth, as do the other orebodies of Schmitz and the namesake Lanfranchi, PAN’s Lanfranchi mine continues to search for another significant orebody. A new approach has shown that the nickel mineralisation at Lanfranchi appears to be controlled both N/S and NNW/SSE, which has resulted in a number of new targets, along with the Lanfranchi West extension.
  • The intersection of 2.9m @ 3.0%Ni in drillhole KUD 810 and EM plate into the deeps below the 900 fault at Savannah opens up another extension to Savannah’s life. A drill drive is planned to be developed in the coming FY to June 2011 to further delineate the upside depth potential at Savannah.
  • Panoramic intends to have a significant exploration programme during the coming year of 2010/2011, undertaking deep drilling at Lanfranchi plus drill drives to probe the extensions of the known lava channels. While at Savannah, aside from the drilling beyond the 900 fault, a number of new near mine and regional targets are to be tested following results from the recent higher resolution gravity survey.

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