worth a little research

Investing is about being patient, I have waited a long time for Albidon (ALB) to relist & present hopefully a good risk/reward outcome. Many current shareholders may view ALB in a different light to me given they have seen having the stock suspended for approximately 18 months & also having to endure voluntary administration, only to emerge again.
Let us look at some of the strengths & weaknesses of ALB.
Strengths:
Munali Mine restarted after company was in Voluntary Administration.
All debt facilities now with JNMC (refer AGM Presentation).
Total ore hauled to surface between Jan-Sept was slightly below budget but nickel grades were above budgeted levels.
Nickel Prices were $18,439 US in Feb, Sept $21,413 US, so benefitting from rising nickel prices. Nickel has good demand & looks like returning to 2007 price levels.
Munali will be low cost relative to peers in sulphide nickel (refer AGM Presentation).
Mine gate off take contract.
Potential acquisitions where synergy exist with Albidon/JNMC.
Munali Mine has reduced tax rate (25%) normally 30% & 0.6% Royalty (normally 3%) until January 2012 from the Zambia Government.
Munali is located amongst excellent infrastructure about 60km. south of Lusaka.
The Munali Mine was only commissioned in July 2008, so it is a very new plant.
Given the past history of ALB it will take the market some time to re rate Albidon to similar status to its peers in nickel.
Nickel sulphide deposits are rarer but more attractive than nickel laterite because the extraction technology is well understood and costs are generally lower.
On Sept 30th the LME nickel price was USD $10.61 lb or AUD $24,196T. at ALB current cost per lb of $5.98 (refer AGM Presentation) they have a margin of $4.63 but this would increase to $8.16 per lb if they reach their target cost of $2.45, so there is enormous leverage to the bottom line if costs can be reduced to target levels.
If all the convertible notes are exercised by Jinchuan they would hold up to 497,437,796 shares representing 74.4% of the shares on issue in the company (refer Notice of Meeting 30/9/2009). So it is unlike Jinchuan would want to dilute its position through equity issues or by taking actions that were adverse to ALB because they would have the most to lose as the major shareholder.
Opportunities:
Songea nickel exploration program commenced. (JV with BHP).
30% equity in Chirundu JV maintained.
Capital structure approximately 679.2m shares after including convertible notes on issue (JNMC,$0.06)
While nickel prices havent returned to their pre GFC levels, production is now 75,000 tpm cf 30,000 tpm previously.
ALB-JNMC co-operation, currently 19 JNMC staff at Munali site. Also collaboration on technical and commercial evaluation of new projects.
Ability to ramp up production, also adjacent resources (Voyager) and depth potential.
Costs per lb/Ni produced to date USD $5.98lb (Jan-Sept 2010) with target cost of USD $ 2.45lb, so operation should become more profitable even if nickel prices didnt increase in the near term.
Aim to grow Albidon into major international mining business supplying commodities to China. It would appear Albidons major shareholder; Chinas state owned miner Jinchuan Group Co. plans to make Albidon an acquisition vehicle for nickel assets according to the former MD Mr. Alasdair Cooke in an interview reported by the Dow Jones. Jinchuan is Chinas biggest nickel producer with an annual capacity of 150,000 tons. Potential targets could include Kabanga in Tanzania, the best undeveloped nickel deposit in the world according to Alasdair Cooke. This quote from the China Daily gives us more insight into Jinchuan, Nickel producer Jinchuan Group Ltd plans to expand its nickel and copper output through overseas acquisitions, Wang Haizhou, president of Jinchuan Group, told China Daily on Tuesday. The company will increase its nickel output from 130,000 tons last year to 200,000 tons by 2015 and boost its copper production by 45 percent to 600,000 tons in two years.
"Jinchuan is looking for overseas nickel resources in Indonesia, Philippines, Vietnam, South Africa, Canada, Cuba and Australia and also investing in copper projects in Chile, Peru, Kazakhstan, Congo and the Philippines, to secure raw materials and cash in on the growing demand," he said.
Wang said the company will focus on overseas acquisitions in neighboring regions such as Southeast Asia and Central Asia because of lower transportation costs as well as mature projects in developed countries. The company is currently in talks for a nickel project in Vietnam and a copper project in Kyrgyzstan, he told China Daily. (China Daily 8/9/2010)
18 months of no listed share market could see many shareholders wanting to sell their holdings in Albidon, so the next few days could see plenty of churn in the share register before it settles down with plenty of new owners. The delisting from AIM could see plenty of UK holders happy to sell their holdings in ALB.
Both KZL & PEM give us some idea of how Chinese companies handle their investments. KZL was 25 cents on 3/3/2009 & now is 80 cents, while PEM was 8.2 cents on 26/11/2008 & is now 58 cents. PEM was a prime example of how the Chinese were able to drive costs lower & improve the bottom line for all shareholders. ALB could also have the same benefits as KZL & PEM in that having a major Chinese shareholder they dont need to go back to the market to raise funds because they have strong major shareholder support for funding arrangements via loans should opportunities arise.
Extensive license holdings in the East Africa Nickel Belt.
BFS was for an underground mine producing 8,500tpa of nickel plus Cu, Co, Pt & Pd from 900kpta of ore (Presentation April 2008).
Concentrate capacity could be upgraded from 900ktpa to 1.2mtpa for around $2.5m (April Presentation 2008) & production increased from 8,500ktpa to 10-10,500 ktpa of Nickel in concentrate.
Supply of nickel is partly underpinned by the fact new nickel laterite mines appear to require a minimum price of US$8/lb for viability e.g. BHPBs Ravensthorpe.
Demand from China for nickel and stainless steel appears to be relatively robust with China expected to maintain a minimum growth rate of 7%-8%pa.
Munali is an intrusion-type nickel sulphide ore body; it has significant by-product credits in its nickel-copper-cobalt-platinum concentrate which significantly reduce its cash operating costs.
Whilst Voyager grades are lower than Enterprise they could increase at depth & have higher Platinum grades.
Weakness:
Actual amount of concentrate dropped in Sept to 2,671T. after rising each month till the August peak of 3,801T. partly due to lower grade ore crushed & lower recovery rates.
ALB does carry some sovereign & political risk which we need to factor in our valuations. We need to remember Zambia borders both Botswana & Zimbabwe & the mine is relatively close to the Zimbabwe border.
Costs, grades, recovery rates & the price of nickel are all going to be major influences on the performance of ALB over the long term.
Conclusion:
Given it looks like ALB have come through a very adverse period for shareholders & survived, I am happy to take a large position & look for a rerating of this stock in the near future.
Whilst I dont give any guarantees on the accuracy of the information of this post, which have been sourced from multiple places, nor do I offer or give any investment advice on ALB, I will leave it to each individual to DYOR on ALB & draw your own conclusions.
Regards
Buffett