Ann: Quarterly Activity Report for period ended 30 June 2015, page-26

Very solid report, my analysis-
COP substantially lower to $4.49 down 8%, well lower than CFO CEO predicted of 4.50-5.00 but very close to my predicted 4.40 (in line with BRL drop of 8%) (surprise result)
BRL av of 3.07 in Q2 (2.86 x 1.08=3.09) , BRL av in Q3 is now 3.30, now better by 7% also
This means BRL drop less than average COP drop by 2c 3.09 v 3.07 bullish for Q3
Production exceeded even my expectations (4000T) up 13% to 4356T (surprise result)
Production on target to reach 5000T pQ faster than i expected around September instead of January that the CEO predicted (surprise result)
Production guidance unchanged ie no lowering
total mined +540,000T higher up 9%
4% higher recoveries to 58% (much higher than prior years ~50%)
Ni grade higher to 0.46%
Despite "shutdown" they had same plant throughput (how was that possible) should be less, very strong
Cash lower to 16M down -$9M
This is solely due to capex of $9M for the tailings dam & sales not exceeding the production and prior production due for delivery in July
However inventory increased massively and sales pushed into Q3 from delayed shipment
Market expected a loss, 0 EPS, much lower cash in bank, well above market expectations
Mill & Mine performance exceeding expectations
Sales lag to production of ~1000T plus the lagged 2000T from prior Qs = US$35M cash
Cash at bank today at 10M impacted by lagged sales
Push of sales into Q3 already revealed no surprises
royalty rates lower on lower sales, expected
1.4MT inventory is massive.
Copper & cobalt production rocketing up 17% (surprise result)

This is my analysis:-
- this beats the markets expectations substantially
- NI grade increased up 10% on last Q, impressive
- production booming well above markets & even my bullish expectations
- massive surprise on booming Ni production up 13%!
- Cu Co production booming up 17%
- massive surprise on sharply lower COP 8%, inventory
- positive surprises on much better - recoveries, total material mined, mill throughput,
- underlying cash is well above market expectations of 0 now ~$10M
- lower cash at bank fully understood as to sales pushed into Q3, expected
- offtake buyers still soaking up all production in full
- transport fleet & crushing circuits shutdown all now strongly producing
- profitable production 5.42 v 4.49 of 21% ex royalty = very strong profit margin

The cash holding is the only disappointment but this was the capex spend on the tailings dam not from the operating trade which broke even even after sales well below the production which is a positive result.

Once that extra cashflow from lagged sales of $34M comes through from booming production, booming grade and recoveries & mill throughput increases with full return of all circuits/transport trucking etc, its underlying profit was around 1000TpQ = US$11.3M pQ

Q3 looking like a stronger +$20M cash Q now with COP headed down another 8% to 4.00 as i predicted. Production headed to around 4700T in Q3 well above expectations with Cu & Co production booming as well. Sales ought to be close to double the production in Q3 to 6800T from the 3402T Q2 thereby (4700T produced + lagged sales of 1000T in Q2 plus lagged sales from Q4/Q1 of 1300T)

The operational performance is strong & beat all expectations.
The cash is weaker due to capex & shutdown & lagged sales
The sales are booming right now in Q3
The production is booming
CR not needed at all, Q3 will confirm the cash rebound

Market has underestimated this strong mine performance & sharp COP BRL drop but got the cash correct. The booming production is a sign that the mine & sales are strong & cash is not the issue.


The issue is its profit margins are lowering from 1.5USlb in Q1 (4.88/5.23v 6.60) to 1.0uslb Q2 (4.49 v 5.46) due to a lowering NP but this appears to have tappered off also at around +1.00uslb
which is better than most Ni miners with a negative margin of -1.00uslb like MCR (6.06 cop v 5.10 NP) or PAN or chinese NPI
At current NP of 5.10 v Q3 COP of ~4.00 its still profitable and holding its margin around 1.00uslb.
At this ratio, its margin is actually expanding higher & better from 18% to 25% the lower the NOP goes! INCREDIBLE!


MBN has booming increased production, is solid profit producing with an incredible increasing profit margin & increasing mine performance but with depleted cash in a tough NP environment. Market says ho hum, all expected ...really! I dont think so!

No one predicted this sharply higher production, higher recoveries, higher Ni grade, high mill/mine throughput, margin expansion.

Cashflow is strong, margin expnasion in an 8 year low NP environment, incredible! Very bullish report compared to MCR, a NP rebound with dropping BRL will see the SP sharply higher IMHO.