AGM - Allegiance Mining

[Halba]

Too many differences with companies

SMY's cash costs, higher than AGM due to high smelting charge/participation

However:

SMY's grades higher than AGM.


Different geological structures of nickel, different nickel provinces(WA vs tasmania), and SMY is a current producer(mines have operating history, AGM's doesn't). SMY's mngmt proven, AGM not yet.

Both go up due to nickel sentiment.

 

[chris1983]

haha Halba your still up. I should sleep. I so dont want to go to work tomorrow. AGM have given me 150+% return in what..4-5 months so I'm not complaining. Its just my opinion it will continue. The main reason I got into these was because they were "moving" into production very soon and I saw them as a safe investment after going through the figures. I guess thats just the type of stocks I look to invest in and it gives good returns. Ive got a few more on the radar that I want to buy. IMO AGM's SP will continue to move up the closer they come to production and thats what I'm after. Its all about timing

 

[chops_a_must]

Dude seriously waste of time to keep debating it. AGM has been very profitable for me..thats all I got to say. I think the profits will continue. lets wait and see what they are in 6 months time.

It is. But...

A 25% write down in anything, in any industry spells alarm bells for me. And it's something that hasn't been explained adequately here, or in announcements.

I'm sure AGM will go up as well, however, I think there are larger gains to be made in a few other nicklers. To me, there is too much risk, with little reward attached.

But if I had held since 30c, I probably wouldn't be selling now, that's for sure.

Another note... the proven reserves, multiplied by the current nickel price, come awfully close to the value of the deal supposedly done with Jinchuan....

 

[chris1983]

Because these figures from SMY have to be compared to AGM's proven reserves of 39,000t. You couldn't produce at 20,000t a year like they are going to do on those figures...

We aren't valuing SMY on their inferred reserves, so why should it be different with AGM? Why the 25% write down in proven reserves?

I thought AGM also have an indicated resource larger than 39,000t

Subtotal Indicated 6.91 Million tonnes @ 1.06% Ni

which is just over 73000 tonnes of indicated nickel resource.

I'll stick with the Total Resources at Avebury 16.27 Million tonnes @ 0.97% Ni 240 ppm Co which is 158,000 tonnes Ni even though it isnt all indicated yet.

 

[chops_a_must]

I thought AGM also have an indicated resource larger than 39,000t

Subtotal Indicated 6.91 Million tonnes @ 1.06% Ni

which is just over 73000 tonnes of indicated nickel resource.

I'll stick with the Total Resources at Avebury 16.27 Million tonnes @ 0.97% Ni 240 ppm Co which is 158,000 tonnes Ni even though it isnt all indicated yet.

From the resources and reserves statement:

Cut-Off Grades: A conservative cut-off grade of 0.85% nickel has been applied in this ore reserve statement so as to be consistent with earlier estimations of ore reserves that were done some years ago when nickel prices were considerably lower than those prevailing at this time.

Ore is being produced successfully as planned from the Avebury Mine and costs are in line with expectations. Given the positive outlook for the nickel market, management will be reviewing the question of the economically optimum cut-off grade for this large project as production ramps-up to steady-state production levels and the long-term costs are confirmed. The economically optimum cut-off grade may be closer to 0.7% Ni than the current 0.85% Ni which would increase the nickel inventory substantially.

As opposed to the 158,000t case at 0.4% which may not be viable (according to them), the 0.7% cut off leads to a total of 131,000t with proven, indicated and inferred figures. The proven and indicated percentages of this total lead to a total of about 67,000t(rough) proven and indicated. BUT, the proven figures at .7% are still less than the old proven figures at .85%

Given that they are targeting 8+ year mine life at about 8,500t or 9,000 t p/a, these numbers seem about right, once you factor in 90% recovery. It will all depend on how well they go at getting the inferred number into the indicated category and beyond etc as to their success.

Sometimes it pays to look closer than the headlines.

 

[chris1983]

From the resources and reserves statement:


As opposed to the 158,000t case at 0.4% which may not be viable (according to them), the 0.7% cut off leads to a total of 131,000t with proven, indicated and inferred figures. The proven and indicated percentages of this total lead to a total of about 67,000t proven and indicated. BUT, the proven figures at .7% are still less than the old proven figures at .85%

Given that they are targeting 8+ year mine life at about 8,500t or 9,000 t p/a, these numbers seem about right, once you factor in 90% recovery. It will all depend on how well they go at getting the inferred number into the indicated category and beyond etc as to their success.

Sometimes it pays to look closer than the headlines.

Chops the low grade means nothing if its economical. The total resource is not at that grade anyway. They have a large portion of it above 1% nickel.

"Cut-Off Grades: Metallurgical testwork consistently demonstrates that low grade nickel mineralisation is readily processed to produce high quality concentrates at high recovery rates. Mineral Resources are reported at a minimum 0.4% Ni cut-off grade which is approximately the natural break between nickel mineralisation and background grades but resources for other cut-off grades are reported herein to allow comparisons with Ore Reserves."

And from the latest report they give an indicated resource of

Subtotal Indicated 6.91 Million tonnes @ 1.06% Ni 258 ppm Co

which is over 73000 tonnes nickel.

Full reports on the resources below

Global Resources Above 0.4% Ni Cut-Off Grade (this Resources Estimate).

1. Inferred Resources
North Avebury 3.18 Mt @ 0.78 % Ni 180 ppm Co
North Viking 1.29 Mt @ 1.32% Ni 256 ppm Co
South Viking 1.26 Mt @ 1.15 % Ni 258 ppm Co
East Avebury 2.32 Mt @ 0.75% Ni 272 ppm Co
Other Zones 0.78 Mt @ 0.77 % Ni 151 ppm Co
Subtotal Inferred 8.83 Million tonnes @ 0.90 % Ni 224 ppm Co

2. Indicated Resources
North Avebury 1.63 Mt @ 1.33% Ni 343 ppm Co
North Viking 1.49 Mt @ 0.97% Ni 230 ppm Co
South Viking 1.56 Mt @ 1.05% Ni 293 ppm Co
Central Avebury 0.56 Mt @ 1.12% Ni 228 ppm Co
Other Zones 1.67 Mt @ 0.85% Ni 177 ppm Co
Subtotal Indicated 6.91 Million tonnes @ 1.06% Ni 258 ppm Co

3. Measured Resources
North Viking 0.53 Mt @ 1.08% Ni 267 ppm Co
Subtotal Measured 0.53 Million tonnes @ 1.08% Ni 267 ppm Co

Total Resources at Avebury 16.27 Million tonnes @ 0.97% Ni 240 ppm Co
contains 158,000 tonnes Ni in resources (132,000 t Ni in 2006)


You said it was an indicated resource of 39,000 t and thats wrong. Thats all I'm pointing out

 

[chris1983]

Anyway bedtime. Im guessing your in Perth too. Way too late anywhere else to still be up. My movie is all finished..and have to get up early for work. We will continue this little debate tomorrow lol

 

[chops_a_must]

You said it was an indicated resource of 39,000 t and thats wrong. Thats all I'm pointing out

Sorry. I was using the wrong terminology.

So do we have a consensus that the figures that should be used are around the 70,000t mark?

The way I read the report is that now because of the nickel market, it is feasible to use grades down to 0.7%, that's why the .85% cut off was the standard before. Less than 1% is already low grade nickel... but to get the .4% nickel, they would have to process a fair amount of the surrounding dirt as well, thereby making it unfeasible.

It appears to read as if:
1) the .4% figure is used because it is the break from the ordinary dirt to the strike/ mineralisation.
2) the .7% figure is used because it is likely that it will become the new feasible cut off grade.
3) the .85% figure is used because it was the old feasible cut off grade.

Just because they have a certain amount above .4%, it does not necessarily make it viable. What might also become a problem if they drop the cut-off grade, is the production per year. It has stuffed a few companies up. But that's an unknown right now.

 

[hypnotic]

Anyway bedtime. Im guessing your in Perth too. Way too late anywhere else to still be up.

Never too late to be awake especially when you know you WILL be sick tomorrow and wont be going to work

Sorry just a bit side tracked from the topic

Hypnotic

 

[Freeballinginawetsuit]

Chris,

In the case of AGM I would certainly not suggest that punters have not made gains on returns in recent times trading them, that’s self evident.

I beg to differ that AGM's current market cap does not have speculation from the mean value, for that matter so does their business commodity, Nickle.

As your posts on AGM and other entries indicate, you seem to invest in non producers albeit early and hold long, speculating on fundamentals. Obviously you are not hedging the inherent risk from mean value by not trading as such, a non producer mainly is pure speculation………especially in a toppy bull market.

An entry in AGM long on a forward view is fine, they have plenty of potential, but it also a clear fact that at current SP’s, theirs significant speculation weighted in.

IMO a comparison between investments in mid tier Nickle producers in recent times as opposed to entries in near term producers at present is a mute point. The hedging of risk is a much different equation. Speculation both in the commodity and companies is at a premium from net value albeit Nickles fundamentals still remain tight.

Youre posts on AGM seem to miss a lot of the inherent business dynamics that will be evident from AGM’S shift from explorer to producer.

A comparison between a past entry into SMY long, to a current entry in AGM is irrelevant. That was a different marketplace for Nickle, speculation was below mean value from a reasonably assumed forward profile.

FWIW past and forward views on SMY are attached (markedly different to those presented by you). These clearly indicate the difference between the level of foreseeable speculation past/present and future, both in Nickle and producing companies. This is evident in the 600 percent increase in EPS for SMY in 07





SMY Reserves & Resources
Reserves Mt Ni% Kt
Sally Malay 3.0 1.6 47.9
Lanfranchi 0.1 2.5 3.0
Winner 0.1 4.0 3.9
Helmut South 0.4 3.4 13.0

Total: 67,800T

SMY Resources Mt Ni% Kt
Sally Malay 3.0 2.0 58.4
Helmut South 0.8 2.9 22.2
Winner 0.1 4.5 4.6
Lanfranchi Ext 0.1 3.3 4.5
Lanfranchi Rm 0.1 2.4 1.5
Schmitz Rem 0.1 4.2 4.5
Helmut Rem 0.2 1.4 2.7
Martin 0.1 3.9 1.9
Edwin 0.0 4.9 1.6
Ham 0.1 1.2 0.8
Cruickshank 1.4 1.3 18.0
Gigantus 0.7 1.5 10.4
Deacon 1.4 3.0 52.2

Total: 183,400T

Note: Further upside on Ex hits to be expected at Sally Malay Deeps, Deakin and Corpicenus which remain open at depth. Winners recent 16% upgrade also yet to be factored in



SMY Earnings Summary – Present-Forward Profiles

Year end June 2006A 2007F 2008F 2009F
Revenue - $M 242.9 588.8 832.7 784.1
EBITDA - $M 69.6 205.0 330.3 287.7
NPAT - $M 15.9 115.9 203.9 174.0
Free Cash Flow $M 14.7 115.1 194.7 190.3
EPS – A$ cents 8.1 59.6 104.8 89.5
EPS - % chg 33.8 633.9 75.9 (14.7) evident

Note: SMY should reap a maiden 20c dividend partially franked after June 07, and regular dividends there after


SMY Profit & Loss Summary – Present-Forward Profiles

Year end June 2006A 2007F 2008F 2009F
Sales revenue $M 242.3 586.7 824.6 769.4
Other revenue $M 0.6 2.1 8.1 14.6
Operating Costs (168.4) (377.4) (496.3) (490.1)
Exploration Expense (0.8) (1.1) (0.6) (0.6)
Corporate & Admin (4.1) (5.3) (5.6) (5.7)

EBITDA 69.6 205.0 330.3 287.7
Pre-tax profit 28.2 164.6 291.3 248.6
NPAT 15.9 115.9 203.9 174.0


SMY Cash Flows – Present-Forward Profiles

Year end June $M 2006A 2007F 2008F 2009F
Operating Cash $M 59.0 142.1 239.0 209.8
Free Cash $M 14.7 115.1 194.7 190.3
Cash End Year$M 30.6 117.0 250.2 380.4


SMY Bottom Line Balance Sheet

Year end June $M 2006A 2007F 2008F 2009F
Total current assets$M 73.1 222.6 398.6 518.9
Total n/c assets$M 142.4 115.7 125.8 148.1
Total assets$M 215.5 338.4 524.5 667.0
Total liabilities$M 114.4 74.2 103.7 94.7
Equity$M 48.9 134.4 279.7 404.6

 

[Halba]

It looks like there is still another 20% gas left in the tank, if comparison with WSA yields anything(WSA has gone up heaps, and is a similar new producer). WSA mkt cap probably over a billion now, but higher resources/production forecasts.

 

[chris1983]

Freeballing SMY's figures were taken from their website and I got nothing against SMY.

Anyway.

You continually forget that AGM have a large portion of their nickel onsold and at a good price. Remember the agreement with Jin-chuan? Its very handy to have a partner like Jin-chuan.

• US$2.2 billion offtake agreement & partnership with Jinchuan Nickel Group, China
• 8,500 tpa Ni in concentrates – offtake by Jinchuan Nickel, China

The agreement with Jin-chuan is supposedly amongst the highest paid for nickel concentrates.

Now you can keep saying its dangerous investing in a upcoming producer etc etc. They have a large portion of their nickel onsold in an "agreement" with an extremely strong partner so risks are limited. Jinchuan will be helping them in every way possible with their expertise and experience to make sure everything runs through smoothly. Whats wrong with investing in non producers? If you think theres risk..which you do...you would obviously stay well away. You can leave the risky shares like BMN/AGM/ERN to me

 

[Freeballinginawetsuit]

You continually forget that AGM have a large portion of their nickel onsold and at a good price. Remember the agreement with Jin-chuan? Its very handy to have a partner like Jin-chuan.

• US$2.2 billion offtake agreement & partnership with Jinchuan Nickel Group, China
• 8,500 tpa Ni in concentrates – offtake by Jinchuan Nickel, Chin

Jinchuan have offtake agreements with most near term producers past and present........hedging risk for near term producers cuts both ways. Capex/Liquidity, dosent fall from trees without some security .

Incidentally SMY's offtake from the Sallay Malay mill is via Jinchuan. It would be interesting to see what AGM's actual numbers are on the offtake agreement........... upside/downside to nickel tightness and speculation in AGM's current market cap.

Whats the numbers on AGM's offtake agreement Chris ?, whats the scenario if Nickles tightness continues and Jinchuan has them by the balls. The cashed up mid tiers have options now, the balls in thier court so to speak.

 

[chris1983]

Ill just say what you want to hear. SMY are the best..they are the greatest. Doesn't change the fact I have made over 150% in 4-5 months.

What I know is

"The agreement with Jin-chuan is supposedly amongst the highest paid for nickel concentrates."

So it seems like they have done a good deal. You can go against all the broker recommendations on AGM etc thats up to you. I dont think your little debating will stop the SP moving up which is all I care about. Like I said..the riskier shares just arent for you. I love the "risky" ones. Personally..AGM is one of my safest stocks so my portfolio could give you a heart attack.

 

[chops_a_must]

It looks like there is still another 20% gas left in the tank, if comparison with WSA yields anything(WSA has gone up heaps, and is a similar new producer). WSA mkt cap probably over a billion now, but higher resources/production forecasts.

It's about 900m.

But it's really the production figures that matter. I certainly think AGM has another 20% left in them. The increasing dilution is a problem in that regard though.

Freeballing... Does that reserves figure include the new upgrades, or is it just the resources that haven't had that factored in?

 

[chris1983]

AGM just touched 90. Getting closer and closer to the $1 barrier.

 

[chops_a_must]

AGM just touched 90. Getting closer and closer to the $1 barrier.

Should get to at least 95c quite easily on this move. Just depends on the nickel market perhaps.

A nice bounce off the close MA yesterday signalled the run. Just about the only nickler not to have had a run recently, so it was due. VRE and MCR had done exactly the same thing this week as well. Second half of the days trading today suggests the same thing is due for AOE tomorrow.

 

[chris1983]

Should get to at least 95c quite easily on this move. Just depends on the nickel market perhaps.

A nice bounce off the close MA yesterday signalled the run. Just about the only nickler not to have had a run recently, so it was due. VRE and MCR had done exactly the same thing this week as well. Second half of the days trading today suggests the same thing is due for AOE tomorrow.

I nearly bought more AOE today too! Hope your right. Yeah AGM are just moving along as planned....they are holding a steep trendline on their graph pretty well.

 

[chops_a_must]

I nearly bought more AOE today too! Hope your right. Yeah AGM are just moving along as planned....they are holding a steep trendline on their graph pretty well.

AOE would be a great short term play right now. It's just that there are some higher probability plays around.

Anytime AOE dipped into the 1.80s, it was snapped up and chased up quick smart.

 

[chicken]

AGM did pretty well on friday rising to 92cents....I wish people would keep other stocks to the boards they refer to but to hijack this thread.....