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    Thursday, January 29, 2009


    Nickel Stock Updates, Mincor, Panoramic (MCR MCR.AX PAN PAN.AX)

    Mincor and Panoramic Resources have just released their quarterly reports. Unfortunately, in Australia, quarterly reports do not have detailed financial data. However, there is a lot of good information. I've updated a number of metrics on both PAN and MCR since my last posts (prior PAN post, prior MCR post).

    My buy price was loosely based on cash and cash equivalent backing net of liabilities. Roughly what Ben Graham called a net net or what Marty Whitman would call readily ascertainable net asset value.

    In the case of Mincor this number has held quite steady at .52c per share down from .58c per share in the prior quarter. I don't believe that there is a particular trend downwards in these numbers. In the case of PAN, however, we are down to around .59c from .90c in early November; this is also the number used in my prior post.

    The key financial metrics are presented in the table below. You may have to click on it to see all the figures.

    It's interesting to note that MCR has higher leverage to the price of Nickel but unfortunately also to the AUDUSD. Unfortunate, because I think the AUD will strengthen. MCR reports net working capital, PAN only reports net cash and receivables so I've estimated payables.

    Since my prior posts I've also developed a long term Nickel price target. At US$7.75, It's lower than the one mentioned in my prior posts on PAN and MCR. I've gone back over analyst's reports from the prior 6 months and used that number to aggregate fair values.

    I've then developed a blended fair value and compared the current price to it along with net current assets and book value.

    By all of these metrics Mincor is the better buy. It has almost the same upside leverage, is much closer to net asset backing, has higher leverage to the Nickel price and is at a larger discount to book value. Mincor has managed their net current assets better than Panoramic and have a lower cash cost. Mincor seems like a slam dunk buy at .58c and a sell at $1.79. Panoramic would be a buy at .59c and a sell at $2.60 (though it would have 4 times upside from .59c). I also worry that PAN may be in a downtrend in terms of net current assets.

    Good work - I like what you are doing.

    Couple of points based on info to date.

    PAN Cash Costs Lower them MCR...

    PAN has a larger Hedge... But Less Cash on hand.

    All up liquid Assets are approx $100M a piece.

    As at Aug 08 MCR had 1.19 NTA and PAN 1.21 NTA... PAN has written down assets MCR has not... I expect them to be approx. the same NTA.

    MCR does have lower MCap, but that is due to its lower margins, less hedging, therefore more risk.

    To say that MCR is easily a better a buy is incorrect imo. They could almost be the same business.

    I think you should also estimate free cash flows and an NPV @ 10% for each coy. That would really complete your work.

    Cheers and good luck!
    Oh - One last point regarding PANs payables per Qtr.

    Generally its $15-$20M... You cant include the payment of annual tax or Interim dividends, which are the two items that have filled out the bulk of PANs last 2 Qtrs.

    Reuters Survey Analyst Poll - Nickel to average in 2009

    // Deutsche Bank - $3.663/lb
    // UBS - $4.00/lb
    // Goldman Sachs - $4.0733/lb
    // Scotiabank Group - $4.20/lb
    // GFMS Consulting - $4.4793/lb
    // Citigroup - $4.50/lb
    // Evolution Securities - $4.50/lb
    // Haywood Securities - $4.50/lb
    // Investec - $4.50/lb
    // Base metals - $4.53/lb
    // China Int Futures - $4.536/lb
    // Calyon - $4.54/lb
    // Fairfax IS - $4.54/lb
    // Standard Chartered - $4.57/lb
    // MAPE - $4.5927/lb
    // Virtual Metals - $4.672/lb
    // ASTMAX - $4.7628/lb
    // Karvy Comtrade - $4.7628/lb
    // MF Global - $4.7628/lb
    // Fox-Davies Capital - $4.80/lb
    // ANZ - $4.875/lb
    // Barclays Capital - $4.9215/lb
    // Bernstein - $4.9261/lb
    // JP Morgan - $4.932/lb
    // Mitsui Bussan Commodities - $4.99/lb
    // Canaccord Adams - $5.00/lb
    // Macquarie Bank - $5.00/lb
    // Midas Funds - $5.00/lb
    // National Bank Financial - $5.00/lb
    // RBC Capital Markets - $5.00/lb
    // Societe Generale - $5.1256/lb
    // BNP Paribas - $5.1259/lb
    // EIU - $5.20/lb
    // HSBC - $5.22/lb
    // Morgan Stanley - $5.25/lb
    // CPM Group - $5.37/lb
    // CIBC World Markets - $5.38/lb
    // Desjardins Securities - $5.50/lb
    // Royal Bank of Scotland - $5.50/lb
    // CLSA - $5.60/lb
    // Metals Bulletin - $5.6133/lb
    // Credit Suisse - $5.70/lb
    // BMO Capital Markets - $5.75/lb
    // ING - $5.75/lb
    // Way2Wealth - $5.806/lb
    // CBA - $5.83/lb
    // Commerzbank - $5.9421/lb
    // Danske - $6.0102/lb
    // Natixis - $6.1585/lb
    // RFS International - $6.3504/lb
    // Standard Bank - $6.6665/lb
    // Merrill Lynch - $6.86/lb

    * Mean Forecast for 2009 - $5.093/lb / Median Forecast - $5.00/lb

    * Mean Forecast for 2010 - $6.1453/lb / Median Forecast $6.00/lb
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    Disclaimer and Disclosure Analyses are prepared from sources and data believed to be reliable, but no representation is made as to their accuracy or completeness. I am not paid by covered companies. Strategies or ideas are presented for informational purposes and should not be used as a basis for any financial decisions.
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