Mincor Resources NL (ASX:MCR)

April 08, 2014 | Price: $0.68

Emerging Companies

Overview: Mincor Resources NL (“Mincor” or the “Company”) is an Australian mining company with nickel assets in Kambalda, Western Australia. It operates the Miitel and Mariners nickel mines, which host reserves of 0.67Million Tonnes (MT) @ 3.2% Ni, for 21kT contained metal. Operations commenced in 2001 and existing reserves imply a remaining mine life of two years. Additional Indicated and Inferred resources total 2.4MT @ 3.7% Ni, for 95kT contained metal.

Catalysts: Mine life extensions and a turnaround in nickel prices are the primary value drivers. Amid weak spot market’s MCR has continued to deliver resilient operational performances, cutting its cash costs by 26% over two years to $4.5/lb, and maintaining positive operating cash flows. With cash reserves of $57M, the Company is well funded to sustain operations under current market conditions and delineate additional reserves. Prices have increased 11 percent following the imposition of unrefined export restrictions by Indonesia in January.

Hurdles: Whilst the Company has successfully extended reserves since 2001, the current two-year mine life of its Kambalda operations is a major barrier to income visibility. Nickel prices have contracted for the past three consecutive years and continuation of the trend could significantly challenge Mincor’s financial position. Recent exclusion from the ASX300 index limits the universe of possible institutional buyers of its shares.

Investment View: Mincor offers self-funding exposure to nickel price trends. We are attracted to its operational record, financial position, and capacity to realise immediate benefits from improved nickel markets. Accounting for 17 percent of global nickel production, Indonesia’s export restrictions could providing a platform for recovery off five-year lows and we are initiating coverage with a ‘buy’ rating.

April 08, 2014

Buy

$0.68

CORPORATE SUMMARY

Ticker MCR.ASX
Industry Mining-Diversified
Price $0.68
Shares 188.21m
Other Securities 9.8M unlisted options, 2.04M perf rights
Market Cap $125.16m
Net Debt -$56.90m
EV $68.26m
Issued Capital $23.66m

ASSET OVERVIEW

Name Kambalda Nickel Mines*
Location Western Australia
Status Production
Ore Reserve 0.67 MT (3.2%Ni)
Inventory 21.3kT Ni
*Considering only Mariners and Mittel Mine (100%)

MANAGEMENT

Chairman (Non Exec) David Humann
Managing Director David Moore
Track Record
Value Creation Strong
Operations Strong
Capital Markets Strong

SHAREHOLDERS

Paradice Investment Mgmt 7.3%
Dimensional Funds 5.0%
Directors 3.19%
Top 20 43.18%

Disclaimer

S3 Consortium Pty Ltd (CAR No.433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this report is general information only. Any advice is general advice only. Neither your personal objectives, financial situation nor needs have been taken into consideration. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice.

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