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Tagged with: 2008

Oct 2008 - Low Nickel Price

Why is the Nickel Price Back Below US$5/lb?

Our column in the December 2003 edition of Paydirt, referred to the nickel price closing at US$12,080/t (US$5.48/lb) on 7 November 2003, with the 27-month LME forward curve then above US$10,000/t (US$4.54/lb). According to WMC the real long-term average nickel price was ~US$5/lb, or possibly ~US$6/lb in the opening presentation of Brian Hurley at the Paydirt 2003 Nickel Conference.

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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.

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Oct 2008 - Albidon Limited

Albidon Limited (ALB) – Increasing Munali’s Production beyond 10,000tpaNi

  • Albidon’s share price closed at A$0.56 on 10 October 2008, only 6c higher than its 50c listing price in March 2004. During the past 4 ½ years, Albidon discovered one of the world’s lowest cost nickel mines in Zambia, financed, constructed and brought it into stoping production by September 2008. Even at the current nickel price of US$5.2/lb, Albidon has an NPV 3 x its current share price, at A$1.70/share.
  • Albidon has announced an expansion from 0.9mtpa to 1.2mtpa using the available capacity in the circuit, being the flash flotation (expected 16% to 20% recovery) and additional tanks, raising nickel production to ~10,000tpaNi from MQ 2009.
  • Although the initial stoping grades appear likely (as expected) to average ~1%Ni, the southern end of the orebody appears to be much richer (at ~2% to 3%Ni) being different nickel mineralisation (similar to PAN’s Savannah) comprising of small country-rock breccia fragments in massive nickel (that may plunge northwards).
  • ALB is undertaking a number of studies aimed at increasing production, such as DMS of the lower grade 0.3% to 0.5%Ni fraction (doubles the grade before adding it to the main mill feed), sinking a decline into Voyager (and probably linking to Enterprise North for greater flexibility), and examining possible open-cuts at Intrepid and elsewhere on the current northern extremities of the intrusion.
  • There appears to be increasing evidence that the intrusion and the orebody plunges under limestone cover to the north. Recent geophys has identified possible deeper extension targets to the north and a possible faulted block to the south, both of which are expected to be drilled during December Quarter 2008.

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Nov 2008 - China Impressions

Impressions of China Depend on What You See

In the first two weeks of November 2008, we visited China looking at prospects in Guangxi and Yunnan in the first week, followed by the annual China Mining Conference with ~3,700 participants held in Beijing in the second week.

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Nov 2008 - Understanding Gold

Understanding Gold

Quite a few comments have been written about gold and its expectations since October 2008. Particularly after the US$100/oz fall within two days to 23 October 2008, hovering above US$700/oz despite significant demand for physical gold, and subsequently rising US$100/oz to over US$800/oz similarly over about two days around the 23 November 2008.

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Nov 2008 - Golden Tiger

Golden Tiger Mining NL (GTX) –Seeking JV Farm-in Partners

  • Golden Tiger has made significant exploration progress during the past year and has delineated at least one company-making project area, being a porphyry-copper target at Shuilong, a possible Carlin target and other gold mineralisation at Weilong, vg in skarn mineralisation and other possibilities at Pinghe (the historical GTX original drilling mostly missed it), and other potentially promising targets.

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