Resources total 158,000t of nickel grading 0.97% at a 0.4% cutoff. The grade compares unfavourably to Kambalda miners like Sally Malay and Mincor where grades are typically 2-3%.
Impact
Our initial AGM valuation is $640m or 80c a share fully diluted. This assumes long term US$10.00/lb nickel, an A$/US$ exchange rate of 0.80 and a 10% discount rate. It incorporates expected of exploration success. We include the mooted expansion to 1.5Mt from FY10 forecast life to 2020 based on mining 110% of resources.
Low grades suggest reaching estimated cash costs of US$3.00/lb will be problematic. Mining and milling costs will need to be about one-third of the Kambalda miners per tonne
AGM Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
