Top pound-for-pound nickel picks: Far East CapitalMichael...

Top pound-for-pound nickel picks: Far East Capital

Michael Quinn


Wednesday, October 01, 2003
ALLEGIANCE Mining, Titan Resources and Sally Malay Mining rate among the best value non-laterite nickel stocks based on market capitalisation per pound of in-situ nickel resources, according to a recent analysis of the white-hot market by Warwick Grigor's Far East Capital.

At the time of last week's report, Allegiance was capped at 17 cents per pound of nickel, Titan at 22c/lb, and Sally Malay at 39c/lb. At the other end of the scale, Fox Resources was at $2.62/lb, Jubilee Mines at $5.77/lb, and Tectonic Resources at $6.58/lb.

However, the analysis is not being pitched as a foolproof template for investment decisions, with each of the companies having circumstances that need consideration.

For example, Jubilee has a highly profitable nickel mine that earned a $48 million profit last year, and it is spending $8 million this year on exploration in a very prospective environment.

Allegiance is not well known and needs to raise $8-9 million to develop an exploration decline which, even if successful, will not lead to ore production before 2005.

Much of Titan's resource is lower-grade disseminated nickel, while Tectonic's structurally complex orebody at RAV-8 has been successfully developed and mined in recent times without the company expensively drilling-out the resource beforehand. Tectonic also holds a significant gold-copper resource.

In terms of the other eight nickel stocks looked at, Grigor says that Kambalda explorers Reliance Mining ($1.50/lb) and View Resources ($1.66/lb) look expensive compared to their local mining peers Independence Gold (61c/lb, and a stock held by Grigor) and Mincor Resources (97c/lb).

"The only justifications for these capitalisations would be expectations of significant exploration potential, but it is difficult to see why these companies have any better potential than the others," Grigor says.

"Relative value analysis would suggest that the better value is with the producers."

Cheers
Cerberus