Some good comments made regarding Xstrata and NPV/IRR maximisation across a pool of projects.
With a commodity in plentiful supply and large unmined resources I would fully agree that any decision would be based on return on equity maximisation.
With new PGM deposits I see the broader economics as rather different. Irrespective of whether we are to have a strong or weak economy in the next 6 months an undisbutable fact is that the some of the worlds largest countries are going through an economic revolution that is increasing GDP and disposable incomes at a fast pace.
Car production worldwide can only increease long term as demand from the likes of China, India, Indonesia, Vietnam etc (a list which inludes the top 3 countries in the world by population) moves up strongly from what is a low base compared to Western standards.
This will result in further demand for PGM's and that necessitates the development of new PGM mines. For the likes of China, India etc this is therefore a strategic investment and if the large diversified miners will not develop the new resource to ensure supply be certain that these countries will do so directly.
It is not far fetched to see a chinese soverign fund buy up existing mid tier producers like AQP who have the production experience and then through this vehicle start buying up new PGM development assets.
Developing miners are not a short term game (there are many other opportunities for that profit here and now mentality that is driving todays markets) and if one is holding NKP they should be prepared to hold it for 2-3 years to realise the above average returns that can come from it.
BR Max
NKP Price at posting:
51.0¢ Sentiment: LT Buy Disclosure: Held
