The current price isn't pretty, but stocks are down which is a positive.
Based on World Bank nickel price forecasts which are a fair bit higher than they are presently, I get a value of the company around $2.30. That is $1.55 for current operations, including the net positive working capital (including the $100m cash) and around $0.75 (very back of the envelope as don't have sufficient comparable transaction analysis for in situ nickel resources to make a call or enough info to model capex requirements etc) for resources/exploration assets. If current prices were to persist this value would be around $1.15-1.20 and if they increased in the next couple of years to circa $6/lb and then grew from there that would be around $3. To give an example of the forward curve I used for nickel pricing in my $2.30 number I have included this as follows.
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The prices above I sourced from current World Bank estimates. Obviously such variables are very uncertain by their very nature, but consensus views on forward pricing, whether they turn out to be right or wrong, is important as this factors into peoples current value perceptions.
This has me thinking of selling out of my holding. I have run a variety of different scenarios and am struggling seeing sufficient upside (i.e. risk/return) without several stars aligning. This feels to me a bit like "wishing" rather than a basis for a sound investment decision. For example, prices need to rise substantially over the forward curve with no hiccups in production. From there to get meaningful share price accretion it would appear that there needs to be good resource conversion at sufficiently high price levels to increase the probability of incremental cash flow. I think the company is well run and they are doing what they can, but price (and FX) is completely out of their control.
Now if price can go back to USD17-20k/T or there was a strong view that it could in the short term that would be an investment thesis I would be keen on, however for now I am pondering selling and taking my losses, which at this stage aren't that bad....
