Minara seals turnaround with strong dividend -------------------------------------------------------------------------------- Thursday, 1 March 2007 Paul Garvey
A SOARING nickel price has fuelled a bumper financial result for nickel laterite miner Minara Resources, with the 45c fully franked dividend announced with the results impressing the market and the nation's analysts.
Minara, which operates the Murrin Murrin mine in Western Australia, announced late yesterday a profit for the full year of $339 million, a 688% improvement on the previous year's result.
In addition to a record nickel price, Minara's result was boosted by the best production out of the historically trouble-plagued operation since its opening in the late 1990s.
The mine yielded 31,524 tonnes of nickel over the year, up from 28,240t the previous year.
But it was the generous dividend payment that most impressed analysts, who had been tipping a return to shareholders of 24-29c per share.
UBS Investment Research analysts Fleur Grose and Chris Drew had been tipping a 26c dividend. However, the result was not enough to shake UBS' Neutral rating on the stock.
"Nickel continues to push through all-time highs; while the fundamentals remain broadly supportive, we are wary of substitution risk and believe nickel is likely to negatively impact sentiment for nickel stocks, offsetting the positive growth profile and strong cash flow Minara offers," the UBS analysts said.
At Goldman Sachs JBWere, analyst Ian Preston described the profit as a strong result, with the 45c dividend "clearly demonstrating the board's view of the strength in the current metal market and the sustainable base of operations achieved".
Preston had been tipping a dividend of just 20c/share.
He rates Minara a short-term Outperform and a long-term Buy.
"We believe the market is still not valuing Minara getting to nameplate capacity through the pressure acid leach circuit, let alone the potential from the heap leach expansion," Preston said.
"We believe that Minara is sorting through its production issues and improving the plant reliability of Murrin Murrin – but we stress, the final acid plant fix is the new superheater which is due to be installed in September/October 2007."
Going against the grain were Citigroup analysts Jonathan Battershill and Brian Warner, who had been expecting a dividend of 66c.
"The dividend payout will consume ~$210 million indicating a cautious approach given the modest capex program, $311 million in the bank and soaring nickel prices," Citigroup said.
Citigroup rates Minara a Buy/High Risk.
Shares in Minara were up 51c or 7.9% at $6.98 in morning trade today.
MRE Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
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