WHAT THE BROKERS SAY: Sarah-Jane Tasker | May 04, 2009 Article from: The Australian
GOLDMAN Sachs has upgraded its recommendation on Murchison Metals from "sell" to "hold" because of the upside potential at its flagship project and its involvement in Western Australia's new massive infrastructure project.
Murchison Metals (MMX); Goldman Sachs JBWere; Hold recommendation; 12-month price target of $1.20; Last traded at 98c
Murchison has a 50 per cent interest in Crosslands, which owns the Jack Hills iron ore project in the Mid-West region in Western Australia. Japan's Mitsubishi owns the remaining 50 per cent in the joint venture.
"Jack Hills remains a large-scale project based in Australia and while it has its challenges to overcome before it can be developed, its size and scale make it attractive from a corporate perspective in the face of an improving Chinese economy," Goldman Sachs said in a client note.
Murchison and its Japanese partner also won the rights to build WA's new $4 billion port and rail project through their joint venture Oakajee Port & Rail. OPR will build the new port and rail in the Mid West region, 25km north of Geraldton.
Goldman Sachs said the key issue for Murchison was the development of the Jack Hills Stage 2 Project.
"The resource potential of Jack Hills continues to grow. During the quarter the resource increased to 96 million tonnes of direct shipping ore," the report said.
Murchison has $143 million in cash on hand and no debt, which Goldman Sachs says will provide the company with ample funds to progress the studies for Jack Hills Stage 2.
MMX Price at posting:
$1.09 Sentiment: LT Buy Disclosure: Held
