Mincor On A Roll And Diversifying Away From Nickel
By Our Man In Oz
In his darker moments, when thinking about past mistakes, former WMC Resources boss, Hugh Morgan, must seriously question why he authorised the closure of the once great company’s many nickel mines which dot the landscape around Kambalda in central Western Australia. True, nickel prices were low through much of the 1990s, and equally true, the mines are small and chew up manpower and management time. But, the point which is being driven home today by their new owners is that they are rich, and in the mining world there is a saying which will never go away: “grade is king”. That point is being underlined, highlighted, and printed in bold capitals every day during the current nickel boom by a small Australian miner called Mincor. As well as the small, but rich, nickel mines, Mincor “stole” WMC’s old title and calls itself “the Kambalda nickel company”. The latest plan is to use the mines, which put nickel and WMC on the Australian map way back in 1966, as a lever to grow into new mines, and new metals, and potentially emerge as a diversified miner of global significance.
Largely overlooked by investors for five years after its late 2000 participation in the purchase of Miitel, the first of the WMC mines to be sold, Mincor is finally on a roll. Over the past six months, as the nickel price has soared, and production expanded, Mincor’s share price has blossomed. From a lacklustre A65 cents as recently as March, the stock has traded up to A$1.33 recently, a price which capitalises Mincor at A$258 million. It might go a lot higher if results from its latest discovery bear fruit, and the market starts to recognise the shift in management focus from being a pure nickel business into one with a range of emerging interests, including gold, copper and tungsten.
“We’ve developed a lot of operating skills as a business,” said Mincor chief executive, David Moore, when Minesite caught up with him in his Perth office. “We think we can take those skills and apply them to new projects. The immediate focus will remain nickel, but our other projects look very promising.” Not mentioned by Moore is another factor in the rise-and-rise of Mincor - cash. First is the cash from the spectacular price of nickel. In the June quarter alone the business spun off a cash surplus of A$30 million from the production of 3,800 tonnes of nickel in concentrate. Second is the “forgotten” cash in the form of a handsome windfall gain of A$15.69 million from the transfer of options in Tethyan Copper to its new owner, the London-listed, Chilean-based, Antofagasta copper group.
Mincor’s nickel output, which totalled 13,500 tonnes in the financial year which ended on June 30, generated record gross revenue of A$175 million. Yesterday Moore followed this up by announcing the financial results in which the company had delivered its fourth straight year of strong earnings growth with a 45 per cent increase in net profit after tax to a record A$29.3 million. The strong earnings performance enabled the company to declare an increased final fully franked dividend of 3 cents per share – lifting its full-year payout to shareholders by 67 per cent to 5 cents. This was roughly in line with the target set by RBC Capital Markets, but its analysts expressed some worries about the future for the nickel price and Mincor’s costs. What they missed, however, because it was a post-report event, was the latest round of exploration discovery at the Carnilya Hill mine. Just over a week ago Mincor reported an assay of 4.12 % nickel from an intersection of 5.68 metres, some 430 metres west of previous mining. That drill “hit” has encouraged Moore to flick the switch at Carnilya Hill, in which Mincor is earning a 70 per cent stake, from exploration to “resource definition drilling” and the allocation of a second drill rig to handle the work.
If Mincor succeeds in proving up more ore at Carnilya Hill, which is actually an old BHP nickel mine, so Hugh can’t be blamed for closing that one, then Mincor will effectively have five nickel mines under its belt – Miitel, Redross, Mariners, Wannaway and now, Carnilya Hill. It is the cash flow from these operations which is grubstaking Moore’s expansion plans which include the Tottenham copper project in New South Wales, and the Lake Cowan gold and Gascoyne tungsten projects in WA. “The goal is simple,” Moore said. “To expand massively our exposure to the minerals business outside Kambalda nickel. We have a number of very promising prospects in Australia, but we’re also looking globally for gold and base metal opportunities.”
“We have a strong operational and exploration team,” Moore said. “We’ve re-developed four old mines in the last five years, which is much the same process as developing new mines. As we go forward, 80 per cent of our growth effort will still be focused on nickel, but the other 20 per cent will be on other commodities, where we have some quite interesting stuff.” The question investors would like to have answered is what’s highest on Moore’s agenda or, more specifically, what’s likely to be the next cab off the rank from what has, until now, been a mini-WMC nickel division?
“We’ve actually got five projects in total, but two are not yet granted, so I won’t talk about those,” Moore said. “Of the three we have I would probably rate the Tottenham copper project at the top of list. There’s a potential resource there within six months. It’s really quite significant, as a potential heap-leach from near-surface oxide mineralisation which could be brought into production fast and allow us to produce pure copper metal. Over the longer term, however, is the potential for deeper sulphide mineralisation.” Asked about potential production rates and costs, and Moore begs off, saying it’s too early to say, just that the geology of the area is highly attractive.
Gascoyne tungsten is Moore’s second highest rated target. “We’ve got some good drill results there, but exploration is at an early stage,” he said. “More intensive work is just getting underway, and will help us plan future drilling.” At Lake Cowan, close to Mincor’s existing nickel operations, a ground magnetic survey has been conducted, and a schedule of air-core drilling is being drawn up, hopefully starting in the current quarter – which might provide the small but growing band of Mincor followers with more to cheer about later in the year.
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). Ich hatte Schiss, dass da ein Hedge-Fonds oder jemand anderes damit zu spielen beginnt.