I am quite positive on the LT outlook for HIG although I sold my shares yesterday at a big loss which was a hangover from the Kainantu days. I may have sold out a little prematurely, but it was to re-invest in some more compelling investments for the short to medium term.
The main risks that I see with HIG which made it easier to sell are: 1) Sovereign risk associated with projects in PNG - we have already commented before on the potential for barneys when you put a chinese operated project in a location with volatile landowners. 2) Uncertainty of plant management - operating a high pressure acid leach lateritic nickel process is incredibly difficuilt, capital and maintenance intensive. Just have a look at how long it took Minara/Anaconda to reach profitability and approach nameplate capacity. I would be expecting set backs and problems on commissioning, especially as I don't think there is much real world lateritic operational expertise within the JV. In actual fact, an optimum time to sell this one might be after completion of construction, but before they start hitting all of the commissioning problems. 3)Ummmmm....I thought I had three points?
All of that said, there are obviously manuy positives, so I will be back at some stage in the next 6-12 months.
HIG Price at posting:
0.0¢ Sentiment: Hold Disclosure: Not Held
