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Tagged with: SMY

Oct 2005 - Sally Malay Mining

Sally Malay Mining Limited (SMY) –Extending SMY’s Life Beyond 8 Years

  • Sally Malay is currently increasing production at both of its nickel mines, being the 100% owned Kimberley Nickel Mines (KNM) in northern WA and 75% owned Lanfranchi Nickel Mines (LNM) south of Kambalda, to ~8,000t Ni pa in 2006.
  • Based mainly on the existing ore reserves of the central orebody at KNM, SMY’s life is about 5 years. However, so far, there has been an ~24% positive reconciliation in contained nickel in the upper orebody (mined essentially from the open-cut). Also, the initial underground levels are exposing significantly greater widths than expected such that the first stoping block indicates a 50% increase in tonnes or 43% increase in contained nickel.
  • Drilling is also extending the Sally Malay orebody further west, with the intersection of 3.6m at 3.1% Ni (and 0.95%Cu) in drillhole KUD56 ~40m from the western boundary inferring further extensions to reserves and resources. When combined with the 11 drillholes already having intersected the lower orebody (below the 500 fault), SMY’s life at KNM could be at least 10 years, at possibly a higher grade than current ore reserves.
  • The initial exposures of Helmut South at Lanfranchi are reminiscent of the thick widths of Helmut with a 16m true width (35m intersected) @ 4.1% Ni containing an 8.1m true width (17.4m intersected) higher grade zone at 5.4%Ni. Some of the Lanfranchi mines were renowned for their thick widths and high grades such as the 6m to 8m thick massive sulphide at 10% to 12%Ni in Schmitz, and the 13,680tNi mined from Skinner in 2000, consisting of 260,000t at 5.3%Ni.
  • Lanfranchi also has the potential to realise a significantly longer life following the discovery that a complete host sequence and contact boundary exists on the northern overturned side of the east-west striking dome. Theoretically the lava channels/embayments that have been mined to-date across the southern side of the dome could recur along the northern side of the dome too.

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Oct 2006 - Sally Malay Mining

Sally Malay Mining Limited (SMY) –Increasing After-tax Profits to >A$60mpa

  • With nickel averaging ~US$28,300/t in SQ06 (US$12.87/lb or 40% higher than JQ06 in A$/t terms at A$37,400/t), and copper ~US$7,640 (US$3.46/lb), SMY may have had a spectacular quarter, easily the best so far. Even providing for hedging, in SQ06 SMY may have exceeded last years’ NPAT of ~A$16m. Significant after tax profits are being generated at these nickel prices, if nickel averages US$20,700/t in 2008 (in line with its forward price), SMY’s after tax profit could then be >A$110m.
  • Sally Malay recently gave a production forecast lasting 10 years based mainly on its namesake mine of Sally Malay which according to our modelling is the main profit driver behind the company. However, the forecast does not take into account the lower orebody or extensions on strike along the boundary of the intrusion, that could extend SMY’s life well beyond 10 years.
  • Sally Malay expects to use the spare capacity in its mill to treat ore from Copernicus (in JV with Thundelarra) and from Panton (in JV with Platinum Australia). However, the additional profits from these two satellites are relatively small compared to Sally Malay using our current price profiles, grade and cost estimates, and have been excluded from our total modelling.
  • Lanfranchi’s current estimated life at ~10,000tpa nickel production is about 5 years. However, it has the potential to be significantly longer since there appears to be little difference between the mineralised lava channels at Lanfranchi and the lava channels at Kambalda and Widgiemooltha that have been found by the other small nickel sulphide producers to extend on strike for many kilometres.
  • Production at both of SMY’s WA nickel mines, being the 100% owned Kimberley Nickel Mines (KNM) and 75% owned Lanfranchi Nickel Mines (LNM) has settled down and blossomed, and could achieve an attributable ~13,500tNi in the year to June 2007 and ~18,000tNi attributable in 2008 according to our (ERA) estimates.

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Aug 2007 - Sally Malay Mining

Sally Malay Mining Limited (SMY) –Heading with Deacon and Sally Malay to >20,000tpa Ni within 2 years (by 2009)

  • Sally Malay has made significant discoveries at both its namesake operation in the Kimberleys of northern WA with the potential Northern orebody, and the probably >60,000t Ni Deacon orebody at Lanfranchi, south of Kambalda.
  • The company-making Deacon alone enables Lanfranchi to attain expected production rates of 350,000tpa, which when added to Winner and a deeper more consistent Lanfranchi orebody, could result in the Lanfranchi mine producing ~15,000tpa Ni from 2009, of which SMY’s 75% would be an attrib ~11,000tpa Ni.
  • The recent discovery of the potential Northern orebody in May/June 2007 at the western end of Sally Malay could result in the mine to achieving throughput rates of ~0.8mtpa to 0.9mtpa in its own right and production of ~10,000tpa to 12,000tpaNi, without Copernicus. Add SMY’s 60% of Copernicus and production ~11,000tpa to 13,000tpaNi may be achievable.
  • The intersection of Ni mineralisation in the Sally Malay decline, resulted in the discovery of the possible Northern orebody with an intersection of ~18m @ 2%Ni and realisation that the Turkey Gabbro dips ~60ºNorth (not vertically), increasingly exposing the Sally Malay intrusion with depth. Further fan-drilling (assays pending) has exposed new mineralisation as potential additional ore sources.
  • There is also significant exploration upside potential at Lanfranchi, ranging from more continuous Lanfranchi orebody mineralisation (based on EM infilling), Deacon/Helmut having joined, extending deeper & possibly even meeting Schmitz. Plus the initial disseminated nickel encouragement from the Northern dome.

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Aug 2007 - DnD - SMY, AVO, CSM

Buy SMY & AVO; CSM worth >$5

  • If we had to pick two stocks, they would be our last two reports : SMY & Avoca
  • Preferred buying order for the nickels: 1. Sally Malay, 2. Indep Group, 3. Mincor
  • IGO could produce 1,000tNi above expected or ~10,000tNi in 07/08. Tropicana expect > 20moz (range is 20moz to 50moz over the 350km strike length).
  • MCR’s 50% increase to 900,000tpa treated by 08/09 appears to be >1.0mtpa.
  • CSM’s Gillet worth well above the ~$4m in the IGR (A$70m to A$95m?), Beta Hunt now improving with Vent #, New Ni concentrator at Widgie appears likely.
  • This Comment started out based on the visits we (ERA) took during this years’ Diggers and Dealers August 2007 Conference. However, it has been extended following the recent decimation in share prices due to trading on money that did not exist, and requests for our nickel and gold favourites.
  • Our (ERA) current favourites are :
  • Sally Malay : Recent August 1 report, rose ~10% on report release, plenty of upside potential, Deacon : HUGE, maiden dividend, debt-free, hedging basically gone (actually lost $112m in hedging in 06/07 & still made ~$90m NPAT (cashflow would be even higher)).
  • Avoca : Recent August 2 report, rose ~5% on report release, market unfazed by negligible production this year, new Wills supergene discovery, potential new Chalice discovery.
  • Independence Group : Steady production from Long/Victor at probably closer to 10,000tpa Ni (quoted as 9,000tNi for conservatism). Tropicana 20moz to 50moz, other new gold areas.
  • Mincor : Significant increase in production coming and plenty of exploration upside. Thinks it should recoup its Otter Juan acquisition within one year with ~$6m cashflow just for July 07.
  • As for CSM : Wait until the last possible day before accepting, the ideal scenario is that neither offers win as in ERA’s opinion, it should not have embarked on this course of action and could have traded closer to $5/share (due to the manganese market upside). If Pallinghurst looks likely to win, then SELL : if TTY looks likely to win, then BUY.
  • There were numerous visits to choose from at Diggers, from which we visited IGO’s Long/Victor Mine; MCR’s Otter Juan, Carnilya & Miitel; and CSM’s new Gillet discovery and new open-cut mining at Armstrong & 132N. Our comment on IGO includes the presentations made by IGO and AGG mainly on Tropicana at the conference, where estimates ranged up to 20moz and beyond.

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