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THE FOLLOWING article issued today arugues MCR is oversold due to BHP selling NWest and its a but at current prices 65-75c and they predict a rise back up to $1 SP, MACQUARIE BANK TP IS $1.55
So Why The Long Face?
Mincor Resources has been unable to match the performance of peers despite the solid operational and financial results, and despite the positive resource update, and despite the positive outlook on the nickel price. In fact the share price has dropped to below A$0.70 in the past month on no negative news released by the company.
It appears that Mincor's share price decline is driven by BHP's announcement to exit its nickel business, including operations in the Kambalda region as part of the Nickel West unit. Glencore (OTCPK:GLCNF), Norilsk Nickel and Jinchuan (OTC:JGRRF) have been named as potential suitors in various opinion pieces published in the Australian press, but certain regulatory hurdles still need to be cleared before a potential deal can move forward. A de-merger into a separate entity also appears to be an option for BHP.
The nickel concentrator in the Kambalda region which also treats Mincor Resources' ore will be one of the assets to be sold off or spun out by BHP, and investors appear nervous about the prospect of Mincor Resources loosing its toll-treatment partner.
To the very best of our knowledge these concerns appear unfounded. The agreement between BHP and Mincor Resources is valid until 2019 and a change in ownership of the concentrator would have to honor this agreement. Termination would come at a cost; and there would be little reason to terminate this agreement by a possible new owner of the concentrator since there is ample capacity to treat the ore from Mincor's mines.
In fact this news item echoes an often-heard sentiment that "new supply will need to be sourced for the Nickel West smelter and refinery [to] operate at more optimum levels". Or quoting a well-known UBS analyst: "Any suitor would likely want seven to ten years of concentrate feed for the smelter and refinery, which would mean developing the Venus deposit and pursuing potential mergers and acquisitions." And such M&A activity may well include Mincor Resources in the longer run.
We have contacted the company and it appears that the company agrees with our view and stresses that there is absolutely no reason to question the toll treatment arrangements regardless of BHP's decisions.
The Wrap
We conclude that investors seeking exposure to quality (Australian) nickel miners have shifted their money away from Mincor Resources to its peers such as Western Areas (OTCPK:WNARF) which continues to flourish. We strongly believe that this situation is caused by an unfounded over-reaction to BHP's stated plans. We expect this over-reaction to be reversed in due course.
In our opinion Mincor Resource offers unchanged deep value, but at a much reduced price. The risks associated with BHP's decisions regarding the Nickel West unit are minimal and concerns leading to the recent sell-off are overblown. The current dip represents an unexpected and highly attractive entry point which we intend to take advantage of in coming days. We are looking to re-enter Mincor Resources at A$0.65 or less with an unchanged price target well north of A$1. Additionally, we note that at a share price of A$0.65 we are looking at a 6+% dividend yield extrapolating from past payouts.
Editor's Note: This article covers a stock trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.

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