Great little article in the May edition of the smart investor
West Australian junior nickel miner Sally Malay (SMY) has had a stellar run this year. Its share price has more than quadrupled thanks to a sharp rise in the price of nickel and sensational exploration results. At about $US50,000 ($61,789) a tonne, the nickel price is benefiting from tight global supply, exacerbated by industrial unrest at Xstrata's Sudbury complex in Ontario, which provies 15pc of the worlds nickel. But the nickel price isn't the whole story, Aspect Huntley mining analyst Matthew Hodge says. "The high nickel proce means the market is receptive to good news and they (Sally Malay) delivered that with the exploration results, which have been sensational in their Deakin deposit in the Lanfranchi mine in Western Australia". The comany has two main projects. The first is the Sally Malay project, in WA's East Kimberley, commissioned since August 2004. The second project is the Lanfranchi joint venture (Sally Malay owns 75pc and Donegal Resources 25pc), which is south of the Kambalda Nickel Concentrator, also in WA. Managing director Peter Harolds background is in financing the marketing in the minerals industry. The company was at the centre of takeover speculation last year as traders spread rumours that a Canadian company was on the prowl. In the six months to December 2006, Sally Malays net profit rose more than 320pc to $32.7 million, driven by surging nickel prices and the Lanfranchi projects rising contribution to production. The upbeat result followed a 55pc profit growth in the 2006 financial year. The company says it is on track to produce about 14,000 tonnes of nickel this financial year and is targeting 18,000 tonnes in the 2008 financial year. In March, Sally Malay estimated 1.426 million tonnes of resources at the Deacon deposit at the Lanfranchi project. That deposit was discovered in October and is double the size of the Helmut South resource, which underpinned the original purchase of Lanfranchi. With the stock at record highs, investors who bought shares in the initial public offering must be pleased. In 2001, the shares were 20c each, and the company was capitalised at $12 million. Today, its shares trade at about $4 each, capitalising the miner at about $730 million.
SMY Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
