THE RIVKIN SHORT-TERM REPORT 14 Dec 04MINARA RESOURCES LTD...

THE RIVKIN SHORT-TERM REPORT 14 Dec 04

MINARA RESOURCES LTD (MRE)

Well, as it turns out, yesterday’s query by the ASX which led to a
production update has confirmed the rumour that was floating around, that
being that the company has incurred further maintenance problems that have
led to further production downgrades. This is a very disappointing
result – and there is little reassurance to be gained by the fact that the
stock seems to be weak in advance of every bad announcement. It seems the
market is very sceptical about any guidance management gives the market
(and rightly so), which is why the stock continues to trade at a discount
to its peers.

Realistically, the downgrade is not substantial, however it appears that
analysts are factoring in further problems in their forecasts. When a
company has as many problems as MRE has, assuming a problem-free year is a
big ask! The fact that the downgrade came on the back of an ASX query has
compounded our concerns. Not only are we questioning the plant’s
reliability, but also management’s handling of the situation, which is a
worry!

We have come to a difficult point with MRE. On management’s continued
guidance, there is no doubt the stock is cheap. However, it seems likely
that it will take a lot for the market to buy into anything MRE says.
Indeed, if MRE can never produce nickel at capacity, then what good is a
resources boom?! Other nickel stocks have soared with the price of nickel,
but MRE continues to splutter while market conditions are good. And
unfortunately, despite the company’s potential, if we can not believe in
the management and plant reliability, then holding the stock seems futile.
We still believe that if MRE gets it right, with nickel prices where they
are, the upside potential is massive. However, at this point, it is hard
to justify the view that management will get it right. There have been
rumours of a possible takeover, and while we feel it makes sense, we feel
the chance of this is not substantial enough to hold on that reason alone.

So, as much as it pains us to say it, we feel it is no longer worth being
in the stock. However, we do not feel that MRE is a sell at any price. We
feel the market has over-reacted to yesterday’s announcement, so we do
feel it wise to wait for some strength in the stock before exiting. We
will keep subscribers updated as to when we feel it is the right time to
sell. We are very disappointed by how this investment has panned out, but
it really does highlight the risks involved with these types of resource
stocks, and demonstrates the importance of appropriate portfolio
allocation.