European Nickel (LON:ENK, ASX:ENK) has taken charge of its own destiny in moving its focus from the Caldag project in Turkey to its Acoje asset in the Philippines, according to Louise Collinge, mining analyst at Evolution Securities.
The company revealed today it is placing Caldag on care on maintenance as it waits for the government to sign off its forestry permit. ENK has decided instead to fast-track Acoje.
�While it is disappointing that the company has not yet received its essential Turkish forestry permit, we believe that it is doing the right thing in focusing its efforts in the Philippines given the significant delays,� Collinge said.
She remains a buyer of the stock with a price target of 55p. At 1.20 pm, the shares were 24.75p, down 7.5p or 23 percent.
A pre-feasibility study for the Philippines project has already been completed, which envisages an operation producing 24,500 tonnes of nickel each year.
Leaching test work will commence in the first quarter of next year, which is a key step in the feasibility process.
Deputy chairman Simon Purkiss told Proactive Investors earlier that he felt Acoje was possibly a better project than Caldag.
Evo analyst Collinge appears to agree with that assessment: �We believe that the company has considerable nickel potential given the significant resources in its control.
�The Caldag project is by no means dead in the water, so we retain our target price which is a nickel resource in the ground based valuation encapsulating the potential at Acoje and Caldag, and making no assumptions on permitting.�
Earlier Purkiss said a combination of �bureaucracy and politics� is to blame for permitting delays that have forced European Nickel to place its Caldag project in Turkey on care in maintenance.
�Unfortunately, there is an election coming up in Turkey in May next year and it seems the permit doesn�t want to come out until then,� he said.
�It was signed by regional officials four to six weeks ago. Every Monday it is supposed to be coming out. But it has not.
�So we have taken the decision that we can�t hang on. If it does pop out, then that is great. We will re-evaluate our position.
�We�d geared everybody up. We had banks doing their work, lawyers etc. We had done everything we could do.
�There are some trees in the area and that�s why we are waiting for a forestry permit. The tree psyche in Turkey is strong. But we have already planted 20-30,000 trees.�
Purkiss said one particular �non-governmental group� campaigned against the development.
But he put the protest into context when he said: �Environmental groups managed to get 200 people to a rally in the town of Turgutlu.
�We opened a small office there and there were 4,000 applications for jobs. So that perhaps underlines the scale of local disquiet.�
On the surface it would appear that the loss of the off-take deal with BHP Billiton (LON:BLT, ASX:BHP, NYSE:BHP & BBL) is a major blow.
However Purkiss believes it presents an opportunity: �The deal was negotiated about four years ago. So our thinking is we will be able to get a better price out there in the market.�
European Nickel now has some breathing room to consider its next move. In the meantime cash burn in the country will reduce to around US$150,000 a month from around US$400,000.
�We have the next three or four months to decide whether to cancel the bank finance,� the deputy chairman said.
�If it doesn�t happen in a month or so we will have moved a lot of the people and slowed down.
�It would probably take a month or two to get Caldag up and running.�
In the meantime, ENK will concentrate on its Acoje nickel laterite project in the Philippines, which it intends to fast-track.
A definitive feasibility study began last March, following a positive pre-feasibility study which confirmed an economically viable nickel heap leach project.
�If anything it has better prospects than Caldag, it leaches faster and is fully permitted,� Purkiss said.
�What we need to do there is run the trial heap which has been constructed.
�It has been waiting in the wings. But we can switch it on pretty quickly.
�We want to demonstrate to any future banking consortium that heap leaching works on this material too.�
ENK Price at posting:
42.5¢ Sentiment: Hold Disclosure: Held
