ENK says feasibility study at Acoje progressing well, brokers say shares are undervalued
Tuesday, May 01, 2012 by Philip Whiterow
Nickel explorer ENK (LON:ENK) is to build its Acoje project in the Philippines over two stages to focus on the higher grade ore first.
ENK is working towards a bankable feasibility study (BFS) for Acoje, which the company now expects to deliver at the end of September.
It said work on the BFS over the past three months had gone well with a number of key decisions made.
This includes building Acoje with Nickel production capacity of 15,000 tonnes per annum in the first stage and a second stage, which would mirror the process plant installation in stage one with a corresponding increase in Nickel output in line with plant feed grades.
The production schedules in the early years of the project will be optimised to take advantage of higher Nickel feed grades to realise higher revenues, ENK said.
“The sulphuric acid plant will only be built during stage 2, greatly reducing initial project capital requirements. Sulphuric acid will be trucked or piped to the mine site from the port facility during stage 1 of the project,” it added.
ENK had already decided to use tank leaching rather than heap leaching to process the ore and said today much of the infrastructure is in place and already permitted.
A resource upgrade at Acoje earlier this year showed an indicated 40.9 million tonnes grading 1.08 per cent Ni, 0.05 per cent Cobalt and an inferred 29 million tonnes grading 0.96 per cent Ni and 0.06 per cent Co.
A further programme of 123 holes for 985 metres commenced in April and is expected to complete during June and provide the basis for a further Acoje JORC update once the data has been collected and analysed.
ENK made five direct shipping ore shipments during the quarter, totalling 258,415 tonnes.
Four of these shipments, totalling 208,030 tonnes, were with an average Nickel grade of 1.80%, while one high-grade shipment of 50,385 tonnes was at 2.0% Nickel grade. Total revenue from DSO shipments was in excess of US$1.6 million.
Future DSO shipments will come from the neighbouring Zambales prospect, where an updated JORC compliant resource estimate is expected by the end of May. The existing resource contains 23.6mt of inferred material grading 1.2 per cent Ni.
The company added it has been taken part in government-inspired review of Philippines’ Mining Policy, but said it had been assured there will be no retrospective changes to projects already underway.
The company added it had US$33.6 million in the bank at end March 2012, which will be sufficient to fund the Acoje BFS and provide some working capital going forward.
In addition, it is reviewing its options for the disposal of all non-core assets, including its minority stake in Berong Nickel.
Broker Investec added that ENK is currently being valued at an enterprise value of just £1 million.
It has a ‘buy’ stance and a 34 pence target price based on a comparison with Nickel resources in the ground at its peers.
Shore Capital expects production at Acoje will commence in late 2013 or early 2014, adding that the recent fall in the share price is a good buying opportunity as the broker expects the share price to climb significantly as the company enters production.
Shares today rose by 4 per cent to 10.4 pence.
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