guided profit forecast

This was first completed on 18 June:

"We are on track to achieve our targeted annual production to June 30 2004 of between 11,500 – 12,000 tonnes of nickel in concentrate".

"As a result, we have determined to increase our exploration expenditure for the forthcoming twelve months to $12 million."

Comment:
These are powerful motivators and they do show that JBM is in a very strong position with about $A1.40 per share in cash on June 30.

Unit cost (incl, deprec/amort and royalties: $A3.17/lb. That is quite low and is due to the high nickel content of the ore, say 9-10%. Current price is about $US5.80/lb or $A8.35/lb, so there is a margin of $A5.18 /lb or $A11.40 per kg.

Febr 18, 2004: “We are expecting comparable second half results with nickel prices anticipated to remain strong and the robustness of our Cosmos operation,” Mr Harmanis said. “Importantly, the rise in nickel prices has significantly exceeded the rise in the Australian Dollar. In addition, we benefit from a natural hedge through our US Dollar denominated treatment and refining costs and project debt facility.”

The $A has since come back but their refining fees would have increased smewhat in $A, as would be their debt. The nickel price was very good in the second half and overall would have been higher than in the first half.

I don't know the exact arrangement with the Canadian firm buying the Ni concentrate. JBM had $A53.5 mill in the first half , so the whole year's profit would be $A 107 mill., but increase it to 112 mill.

Some additional pretax deductions could be used: Additional Capital costs, $3,5, additional exploration $3, some additional treatment expenditure and $A readjustment of debt $4 mill, a total of say $7.4 mill after tax, reducing the profit to $A104.6 mil. Based on 125 mill shares, the E/S=83.6 cents. Based on the price of $ 3.80, the P/E is 4.55.

Dividends. In 2003, 65% of the E/S (43 cents) was paid out in divs or 28 cents.
If again 65% were to be paid out on the E/S of 83.6 cents, then the total div. for the year would be 54.3 say 54 cents, a lift of some 92% compared with last year (Already 20 cents has been paid as interim). The net div yield is 14.2% and most of that would be franked.

(It is possible that JBM may keep some more cash in reserve and pay out less; who knows? This is sometimes done to make the increases look strong over a number of years).

IMHO, a solid company, plenty of cash, working in areas with a high tenor of Ni yield.

Gerry
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