Revenue was $285m vs UBSe $322m, EBITDA was $90m vs UBSe of $80m. Attributable NPAT was $49.2m vs UBSe of $51.7m. No dividend was declared, as we had expected in order to retain cash. The result was roughly in line with our expectations, and better at the EBITDA line due to lower costs. Although revenue was also lower reflecting the provisional pricing impact of a lower nickel price at period end (30 Jun 08 compared to 31 Dec 07). Costs for H1 08 were US$5.24/lb, and are seen rising to ~US$7/lb in H2 08. This is before royalties, SG&A and inventory movements. So this together with $40m of capex (MRE's share) or ~$2/lb, and inventory movement would see cash out flow in H2 08 of ~$10-11/lb. With the spot nickel price at US$8/lb, MRE would be cash flow negative in H2 08 and may need to put in place funding facilities, which at this time in the cycle for MRE could prove difficult if not costly. The threat of a cash shortfall is not likely to sit well with the market in our view. Longer term, assuming that Minara navigates the potential for a cash shortfall, we see value as higher costs from sulphur are not expected to persist into perpetuity and we forecast a long run nickel price of US$8.50/lb. Our current price target of $3.70 is based on a PE multiple of 7x CY09E EPS. We intend to review our earnings and rating post discussions with MRE on the outlook for costs and production given the deferral of the heap leach expansion.
MRE Price at posting:
0.0¢ Sentiment: None Disclosure: Not Held
