Not so long ago the level of debt on the balance sheet would have been considered healthy gearing, how times have changed.
It's a risk play but the upside is considerable given MBN's large resource and current high costs. Any uptick in the Nickel price is highly favourable for MBN.
Wespac's March outlook on commodity prices has Nickel USD/t forecast at Latest 18950 (8.60/pound) June 12 17500 Sep 12 18660 Dec12 19623 Mar13 20200 Jun13 21311 Sep13 21757 Dec13 22428 (10.17/pound)
Westpac short term bearish, medium term bullish on the Nickel price. If Nickel gets to 10/pound again as per Westpacs forecast, and Mirabella is doing the 2012 forecast 20,000 tonnes at say 7/pound in cash costs, that translates to $3/pound x 20,000 x 2204 = 132m. Gross return of 132m before other costs on a current market cap of 400m is cheap. 17 year mine life....
Hopefully by Dec13 production is higher than the 2012 20-22t forecast, and cash costs are around the $5 -$6 level.
It's risky but do the maths on the upside and it's a cheap punt. They will need to get cash flow positive within 18 months IMO or they will be going back to the market for a cap raising IMO, can't see them wanting to takie on more debt.
MBN Price at posting:
86.0¢ Sentiment: LT Buy Disclosure: Held
