Could hold 68c but I doubt it. Currently there are a 1.6M shares on the bid from 71c down to and including 68c. It will be interesting to see how many of those stay on the bid by the time 10.00am arrives. The DOW was down 208 and most of it was lost in the last hour of trading with reports that some big funds were leading the sell charge and there will be more to follow in the weeks ahead. Nickel was also down so if AGM holds 68c at the close of trade tomorrow, it will be a very big effort. I read with interest tonight the latest forecasts from a leading broker who has picked the nickel price exactly. They are forcasting a much weaker nickel price in 2008 and further weakness in 2009. They note that the last time LME inventories of nickel were at 13,000 tonnes, the nickel price was $9.40 per lb or $20,680 per tonne. One could deduce nickel is currently overvalued on that basis by approximately 50%. Nickel is also in a downtrend at the current price rather than an uptrend when LME stocks were falling. Also remember, AGM only get around 75% of the spot nickel price from Jinchuan. So if nickel does get to $25,000 a tonne by year end, AGM will be selling at $18,750 per tonne. By my calculations, NPAT would be approximately 90 million AUD which equates to EPS of 12c. A P/E of 5 would put them at 60c which would be fair value. By 2010, they should hopefully be producing 20,000 tonnes of nickel after commissioning of the second ball mill and earning approximately 160M AUD NPAT (noting the higher production but lower forecast nickel price for 2009 and 2010). This would be EPS of 21c and a forward P/E of 5 would value the shares at $1.05. Now you can see why I sold when the price got above $1.10. It was too far ahead of itself and the market was factoring in unsustainably high nickel prices. Long term I see $1.50 if the market got REAL HOT for nickel stocks again but that is a long, long way off.
AGM Price at posting:
0.0¢ Sentiment: Sell Disclosure: Not Held
