I wrote about Nickel, Mincor and Panoramic resources here , here and here. I sold out of PAN a few months ago and have now closed out my Mincor position. In this post I estimated a long term price for Nickel (all in USD) of $7.75, Nickel was $5.18 at the time. Today Nickel traded as high as $8.53. To briefly reiterate the basis for the $7.75 estimate it is a blend of the 2000 – 2008 average and the marginal cost of production. Nickel can be replaced in Steel manufacturing by pig iron for prices of Nickel over $8.
My fair value estimate for Mincor is $2.27. Today it traded as high as $2.30 and I sold out. I placed the limit sell order ahead of time so I wouldn’t have to go through the difficult psychological process of selling a very successful position.
After such a big shock to the world economy it doesn’t make sense that Nickel would already have exceeded its 10 year average (the long term average is even lower at $5.60). While I can believe (as outlined here) that China and India have shifted the demand curve and that the supply curve has shifted; this ought to be captured in the 10 year average.
Nickel may double in the next month on its way to all time highs but it’s no longer a value investment, neither is Mincor.
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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