miningnews article

Kambalda miners still a force
Thursday, 11 January 2007
Paul Garvey

PATERSONS has maintained its Buy recommendations on two Western Australian nickel miners and upgraded its call on a third, reflecting a continued faith in the outlook for the stainless steel additive.

Patersons analyst Levi Spry maintained his Buy recommendation on Kambalda region nickel miner Mincor resources, saying the company's recent acquisitions and exploration success at the Mariners and Carnilya Hill deposits were yet to be factored in to the company's share price.

And news flow from Sally Malay Mining's Copernicus and Lanfranchi joint ventures is likely to act as a catalyst in improving that company's share price, with Spry also rating the company a Buy.

"Sally Malay will increase its resource base, through addition of material from underground and through more positive results from Sally Malay western extensions (though these will be low grade) and continued Lanfranchi exploration," Spry said.

He has upgraded his recommendation on Independence Group, which operates the Long nickel mine near Kambalda, to Hold following recent retreats from the share price high that prompted Spry to call the stock a Sell.

Spry said Independence's involvement in the hotly anticipated Tropicana gold discovery in Western Australia meant the company was now considered a nickel and gold stock, rather than a pure nickel play.

"We believe almost half of [Independence's] current market capitalisation is being attributed to its 30% share of the Tropicana JV," he said.

He added that while Long was maturing, it still remained the lowest unit cost producer of the Kambalda miners, due to its high-grade ore body.

"Although mining conditions are becoming more difficult as long gets deeper, ground stress increased and mining activities are spread wider, Independence's head grade means it will have a much lower unit cost for some time yet," Spry said.

Spry's positive outlook for nickel remains, despite nickel rising to well over $US30,000 per tonne in recent times.

"New supply from large laterite projects such as Goro (CVRD/Inco) and Ravensthorpe (BHP Billiton) is yet to impact the nickel market, as these projects continue to experience delays (and large capital overruns)," Spry said in a research report.

"Demand for nickel remains strong, with a net deficit in supply of 13,000 tonnes expected in calendar 2007.

"The high unit-cost nickel sulphide producers of the Kambalda region are well placed to take advantage of these record high nickel price levels."