jubilee a nickel plated target

Jubilee a nickel-plated target
Kevin Andrusiak
June 25, 2007

JUBILEE Mines' nickel dreams continue to grow at its Alec Mairs deposit, as sources say the company is becoming too big to ignore as a possible BHP Billiton takeover play.
BHP operates a nearby mill that is running well under capacity and, in the long term, it has its eye on ensuring a reliable inventory of high-grade nickel ore.

Goldman Sachs JB Were materials analyst Ian Preston has forecast net profit for Jubilee of $193.8 million this fiscal year and $162.2 million next financial year, based on a deterioration of the nickel price.

But Mr Preston believes that global shortages of nickel might one day mean Jubilee becomes a takeover target.

"We are also very cognisant of the paucity of high-grade nickel sulphide ore bodies globally and the increased focus of the majors for concentrate feed for smelters," Mr Preston wrote in a recent report to clients.

Drilling continues to show the Alec Mairs 5 deposit, adjacent to Alec Mairs 2 and 500 metres south of the Cosmos Deeps mine, has the potential to raise Jubilee's nickel inventory to around 400,000 tonnes of metal. "These new results confirm Jubilee's belief that the wider Alec Mairs Complex is an emerging large mineralised system with potential for multiple substantial sized nickel sulphide deposits," Jubilee announced earlier this month.

Bell Potter analyst Stephen Thomas said Jubilee was on track for a record first-half result and the AM5 discovery had the potential to double Jubilee's nickel reserves. "We estimate the AM5 discovery has sufficient size, grade and accessibility to lift Jubilee's production profile to around 50,000 tonnes per annum," Mr Thomas said.

"This is a major value and earnings uplift event and further enhances the massive corporate appeal of JBM."

He believes Jubilee could return a net profit after tax of $211.2 million this financial year and $320.4 million in 2007-08. He has put a 12-month price target of $23.08 on Jubilee stock.

One hope for Jubilee is that BHP Billiton might find it too difficult to ignore its near neighbour in the West Australian Leinster region.

Any takeover play would have to appease Jubilee founder Kerry Harmanis, who controls a 15.2 per cent stake in the company.

But he has always maintained that he will sell his stake if the price is right.

Sources said BHP's Perserverance mill was being under-utilised and running at only 60 per cent capacity while the mining heavyweight was having problems with magnesium oxide clogging at its Kambalda operations. The Perserverance mill is only 30km south of Jubilee's Cosmos operations while the ore could also be blended and used in the Kambalda smelter. "They will soon have about $15 billion worth of nickel. That's why BHP will find Jubilee too hard to ignore," the industry source said.

"It never made sense before when Jubilee only had 110,000 tonnes of nickel inventory.

"I haven't heard anything yet about a BHP approach, but you would have to think they are quietly running the ruler over the company.

"Why would they like any other company? Jubilee has been the best exploration company Australia has seen over the past 10 years."


http://www.theaustralian.news.com.au/story/0,20867,21960213-643,00.html