From Criterion this mornings AUSFinally, Tony Howland-Rose at...

From Criterion this mornings AUS


Finally, Tony Howland-Rose at Allegiance Mining is seeing the fruits of 10 years of hard work. Mining operations are getting under way at the Avebury mine in Tasmania and drilling is turning up more nickel all the time.

We rate Allegiance a BUY, our normal cowardly caution overcome by London's Fox-Davies Capital putting a target price of $1.26 a share. (ABN AMRO's target, by contrast, is 89c.)

The company was formed in 1997 and Avebury was discovered the next year. The existing resource is 114,000 contained tonnes of nickel.

Allegiance's operation is underpinned by its relationship with the huge Jinchuan metals group in China. Offtake agreements between Chinese corporations and local producers (or emerging producers) are now common events.

But there was a twist in January. Jinchuan had bought some Allegiance shares in conjunction with the offtake agreement, but then two months ago picked up another 7.5 million of the company's stock. The Gansu-based nickel giant had never previously bought a second tranche of shares outside an offtake arrangement, with any company, before that