City brokers Evolution Securities and Fairfax put out comments today in reaction to European Nickel�s (LON:ENK, ASX:ENK) wide-ranging operational update, where it outlined plans regarding the Acoje project in the Philippines and the latest board changes in the wake of the company�s decision to put the Caldag project in Turkey on ice.
While Evolution reiterated its �buy� stance and its 55 pence price target - ENK was last trading at 22 pence -, Fairfax was more cautious, saying it is awaiting the results of the heap leach trial at Acoje.
European Nickel plans to start drilling programs on the Acoje and the Zambales chromite deposit in late May 2011, with preparatory work beginning immediately. The company sees significant potential to extend Acoje�s existing ten year mine life by converting the JORC inferred Acoje and Zambales resources to JORC indicated status.
European Nickel is fast-tracking the definite feasibility study for Acoje in line with its new focus announced in December, when it said it was switching its attention to the Philippines project after suspending the development of the �aldağ project in Turkey.
The company had reached an advanced stage with �aldağ, it had project financing arranged and the only thing holding up proceedings was the re-issue of a forestry permit. It decided last month to put the project on care and maintenance, suspending development until the permit was received.
Today, the company revealed that co-founder and executive deputy chairman Simon Purkiss is leaving the company with effect from January 31, but will continue to be working with the company in a technical consulting role. Managing director Rob Gregory will take over his executive functions.
Further, chairman David Whitehead is stepping down at the August 2011 AGM, and Ric Burns, previously senior project manager at �aldag, has been appointed as chief operating officer.
Evolution pointed out that pre-feasibility work in 2008 demonstrated that Acoje is a robust project, given the net present value of US$586 million, estimated at conservative nickel prices. The indicated resource of 34 million tonnes at 1.09 percent nickel was included in the study. In addition, the company also has resource potential in the approximately 40Mt of inferred resources at Acoje and Zambales, and in untested saprolite material at Zambales, which could result in a mine life of over 20 years.
�We therefore see significant potential at Acoje and, given the ongoing permitting issues in Turkey, support the group's change of focus,� Evolution said. Its 55p target price reflects a nickel resource in the ground valuation, and it sees considerable upside potential on Acoje advancing towards production.
The definitive feasibility study should be complete by mid 2012, and a key component of the DFS work is the heap leach trial which should take around 12 months to complete.
Fairfax noted the latest developments and said that the problems European Nickel faced in Turkey highlight the difficulties with the country as a mining jurisdiction �and we urge caution to investors looking at assets in the country�.
�Clearly European Nickel is going through major changes with focus now very much on Acoje. We wait to see how the results of the heap leach trial progress to determine whether this is an economic proposition,� the broker added.
ENK Price at posting:
33.0¢ Sentiment: LT Buy Disclosure: Held
