huntley has just rerated the stock, page-4

Heres the article for those that are interested:

First tentative signs of improvement


We maintain our Hold recommendation despite an increased valuation with the share price rising strongly. Continuing discussions for a corporate transaction will keep speculative interest up but there is short term risk if nothing eventuates. While manganese and chromite markets appear to be improving, the turnaround still has a way to go with nickel operations underperforming. Newish management is making a concerted effort to erase the inherited legacy of disappointment. Reporting has improved, increasing transparency. More may be needed to comfort investors on manganese and chromite market risk. CSM is looking at further disclosure enhancements but is wary of giving sensitive price information to customers.


Much has been made of CSM’s nickel diversification strategy but it hasn’t been smooth sailing. The company suffered a recent setback when some East Alpha nickel ore blocks disappointed, necessitating a writedown in reserves. This led CSM to lower FY07 nickel production guidance from 6,000-6,400t to 4,600-5,000t. Forecast cash costs have increased from A$4.50-5.00/lb to A$6.75-$7.25/lb with reduced output and higher royalty costs due to buoyant nickel prices. Manganese and chromite production remain steady state and on track to meet guidance. Both markets are starting to show small signs of price improvement. BHP is looking at expansion options for its Groote Eylandt manganese mine, an encouraging sign the manganese market may be recovering.


Our valuation rises 30% to $2.15 a share after raising our short term nickel and manganese prices and accounting for the substantial rise in value of minority shareholdings, particularly Jabiru Metals (JML). Long term assumptions remain US$2.50/dmtu manganese, US$5.00/lb nickel, a 0.76 A$/US$ exchange rate and a 10% discount rate. Our FY07 NPAT forecast falls 20% to $27.5m. Poor nickel performance is partially offset by price increases. We expect nickel to average US$14.50/lb in 2H07 compared to US$10/lb previously. Approximately 27% of forecast 2H07 nickel production is hedged at US$11.74/lb. We upgrade our FY08 NPAT forecast 18% to $70.8m after raising our forecast manganese price from US$2.30/dmtu to US$2.50/dmtu.


Compared to 1Q07, 2Q07 Woodie Woodie manganese output fell 8% to 226.6kt. Production remains on track to meet FY07 guidance of 900-925kt. Cash costs rose 6% A$2.23/dmtu but CSM maintained its FY07 range of A$2.00-2.20/dmtu. Chromite output from Coobina fell 3% to 62.0kt but is on target for 240-250kt guidance. Cash costs are tracking below the A$127-140/t range. Nickel production of 964t was 9% below 1Q07 and significantly below budget as some central East Alpha reserve blocks disappointed.