MRE - Minara Resources

[Fab]

Thanks Kennas for the feedback. I am still tempted to invest in this warrant as it expires in 11/07 and it could be a good mid term type of investment in a resource stock that like ZFX keeps going up up and up.
WOuld you know where to find this warrant general information from Citibank website (I mean delta and so on info).

Cheers

 

[Sean K]

Thanks Kennas for the feedback. I am still tempted to invest in this warrant as it expires in 11/07 and it could be a good mid term type of investment in a resource stock that like ZFX keeps going up up and up.
WOuld you know where to find this warrant general information from Citibank website (I mean delta and so on info).

Cheers

No, I don't do Warrants. It's on the list of things to study.

 

[Freeballinginawetsuit]

MRE is outperforming the market as usual, 15 percent up in a couple of days, Fundamentals should see this profit take action over, and it pushing new highs again IMHO .

 

[Freeballinginawetsuit]

A nice strong run through $6 with volume today for MRE . All time highs

Some consolidation at these levels and a run to the mid $7's wouldn't be out of the question before Xmas.

MRE's profits will be outstanding for the last half of 06, full plant output and sustained record nickle prices (a great combination) for an unhedged large producer.

Nearly 40 percent up since November's pullback, a nice bounce indeed!.

 

[michael_selway]

A nice strong run through $6 with volume today for MRE . All time highs

Some consolidation at these levels and a run to the mid $7's wouldn't be out of the question before Xmas.

MRE's profits will be outstanding for the last half of 06, full plant output and sustained record nickle prices (a great combination) for an unhedged large producer.

Nearly 40 percent up since November's pullback, a nice bounce indeed!.

A monster MRE is!

EPS(c) PE Growth
Year Ending 30-12-06 66.6 8.9 420.3%
Year Ending 30-12-07 55.8 10.7 -16.2%

Earnings and Dividends Forecast (cents per share)
2005 2006 2007 2009
EPS 12.8 66.6 55.8 41.2
DPS 10.0 29.8 26.0 16.6

thx

MS

 

[traderandy]

MRE opened quite strongly (about 2-3%) but is now being sold hard - 2.8% down on such a positive morning for the rest of the ASX.

Any clues on what is going on?

 

[Freeballinginawetsuit]

As simple as profit takers, their are certainly plenty of them!.

 

[rederob]

MRE announced cash on hand at $177m at end of quarter, and record output from Murrin Murrin.
The next dividend is looking to be much greater than the 12.5cents (total of $58m) paid on 22 Sept to stock holders.

Has about $310m cash on hand at end December, so the next dividend should be a good deal more than 12.5 cents.
Furthermore, nickel prices appear to be stuck over $30/k/tonne which might just double MRE's cash on hand by end of financial year.
MRE has about 465m shares on issue, so the eps multiple for this stock might get lower as the year draws on.
I think it's a bit undervalued, but clearly has never been a market darling.

 

[wintermute]

I've had a personal target of $7.30 on MRE for quite a while... could have made a killing if I'd sold at the high points and bought back in on the drops, but I'm content that I bought in at $2.55 and sold half at $5.25

I posted this back on 13/10/2006 on sharecafe, note one mistake edited (changed quarter to month), which explains my target of $7.30... Now I haven't re-visited this calculation in light of the latest qurterly report, but considering they paid out over $50 million in dividends in Sep, I think I may be in the ballpark

I've had another look at the profit that MRE is currently making and have another forecast of $7.30 per share by maybe April or May next year... This of course depends completely on the Nickel price staying around the $30,000 US / tonne, and that MRE's costs remain constant, and they don't spend any large chunks of cash on upgrades/ unplanned maintenance, etc...

Based on some quick calcs from the 3rd quarter report it looks like MRE is making about $41 Million a month at the moment in profit. if you multiply that by 6 (for the remaining six months of the calendar year from June) you get a whopping $246 million.... if you add the $100 million from the first half you get $346 million full year profit. divide that by the number of shares on issue and you get an eps of 73cps based on a low industry standard P/E of 10 that equates to $7.30 per share.

As always I urge you to do your own calculations, as I have made mistakes in the past! and also remind that the murrin murrin plant has had breakdowns in the past, and is not immune from future problems. But I think that this should show that the sp climb isn't over yet.


My only regret is that I didn't buy more!!!

Tony.

link to original post

 

[Reefer]

I guess you guys are keeping an eye on reports from the other nickel producers but a look at the Lionore announcements (LIM) gives a pretty good idea where Minara might be heading. In LIM's ann of their Q3 2006 results, production was similar to Q3 2005 but Net Earnings Q3 2006 were $148m compared with $7.9M (Q3 2005), and EPS up from 4 cents in 2005 to a massive 68c for the same quarter 2006. May be some containment of costs involved but the average price of nickel in 2005 was $6.68lb and for Q3 2006 was $13.24 lb. So you would expect the half yearly's for MRE to be showing some pretty good figures as well. MRE don't tend to release as much good information into the market as LIM which may be why the shares are a bit volatile. I agree there is plenty of upside in the SP yet, IMO.

 

[PeterPan]

Hi guys,
I’m new of the forum and of share investing/trading. However I’m quite passionate about it and have a couple of questions for you on Minara/Sally.

I’m using Andrew West as broker and their website is quite full of info and financial details. I have some shares in Minara but I’m interested in Sally as well.

Here’s my questions:

1) My broker rates Minara as Higher Risk whereas Sally as Average Risk. However if I look at their risk indicators Minara looks pretty solid (current ratio 2.88, quick ratio 1.96, debt/equity ratio 7%). Sally, on the other hand has current ratio 0.64, quick ratio 0.55, debt/equity ratio 98.3% !! How come that Minara is considered riskier than Sally????

2) Valuation of Minara and Sally. According to my broker website Minara should be at around $9 and Sally at around $10. However, Wintermute says that Minara’s value should be around $7.30 and Feballer says that Sally at $3 is already pretty valued!!!

Could you please help me understand what calculation / reasoning you guys adopt to value the price of these two shares??

Many thanks for your help.
PeterPan

 

[rederob]

Hi guys,
I’m new of the forum and of share investing/trading. However I’m quite passionate about it and have a couple of questions for you on Minara/Sally.

I’m using Andrew West as broker and their website is quite full of info and financial details. I have some shares in Minara but I’m interested in Sally as well.

Here’s my questions:

1) My broker rates Minara as Higher Risk whereas Sally as Average Risk. However if I look at their risk indicators Minara looks pretty solid (current ratio 2.88, quick ratio 1.96, debt/equity ratio 7%). Sally, on the other hand has current ratio 0.64, quick ratio 0.55, debt/equity ratio 98.3% !! How come that Minara is considered riskier than Sally????

2) Valuation of Minara and Sally. According to my broker website Minara should be at around $9 and Sally at around $10. However, Wintermute says that Minara’s value should be around $7.30 and Feballer says that Sally at $3 is already pretty valued!!!

Could you please help me understand what calculation / reasoning you guys adopt to value the price of these two shares??

Many thanks for your help.
PeterPan

When in doubt, remove it by buying both.
Or sell both and gamble your savings on the dogs.

Sally has gained a good run due to excellent exploration results. It will be years before these results are translated into production and real $$s

Minara is totally unhedged and knocking out about 600tonnes a week (of which 60% is theirs), worth almost $15m per week (less cost of production).

SMY will deliver about 50% of their production in 2006/7 into hedges averaging under US$10,000/tonne: SMY will produce less than half the amount of nickel that MRE "claims" this year (40% of MRE total output [of 600tonnes/week] is "owned" by Glencore).

My personal view is that SMY will get severely punished by investors when they put out their 6 month and annual reports as their "profits" will not reflect the prevailing high spot price, and be further impacted by very high treatment and refining costs. I cannot argue with the price action of SMY, as it is spectacular. But on fundamental grounds I will not look at it until its hedge book is cleared and it gets a better offtake deal with Jinchuan.

 

[wintermute]

Hi PeterPan, first I'm no expert at valuing companies , second, my valuation is (I think) very conservative (and simplistic) as that figure is based on a nickel price of US $30,000/tonne, and what I predict their profit is going to be... no ROE, futre prospects, risk weightings, just simple p/e.... Now part of the simplistic nature of that is that it was only based on 6 months worth of results (which are due soon) at the high nickel prices... the first half year had much lower profits than what I expect for the second half... and a P/e of 10 (when the sector generally trades at a p/e of maybe 14 or 16)

The fact that the nickel price has shot up even more means that potentially the eps will be higher (and certainly for the second half of 06/07 financial year it should).

MRE will be earning a lot more than that for the 07 calendar year if nickel prices remain high, so based on the next 12 months profit if we assume nickel will stay at over US $30,000/tonne MRE will have even bigger profits.... thinking about it I should have bought more when they dropped back to around $5.50 doh..

One thing that to me makes MRE a bit easier to put a value on is the fact that they have a 30 year mine life.... so earnings will be coming for a long time.. a lot of mines have a life of 5 years or shorter, making reliance on (successful) exploration much more important.

MRE has a bad track record for reliability, It looks to me that they have finally overcome that, but a lot of brokers still factor it in to the risk side of things (huntly's when I bought in back in August had them rated as sub investment grade).

I don't know much about SMY, I only just had a brief look at them this morning, I'm looking to get some more nickel exposure before 1/2 yearly / final results come out. The quick look I did have didn't leave me particularly enthused (I really should take notes because I don't remember why now), I'm also looking at MCR (which I don't hold... main downside with them (from memory) seems to be short mine life) and CSM (who I hold and would like some more of, but nickel is only a small part of their overall revenue at present).

Finally I no longer trust brokers recommendations, half the time I think I'd be better doing the opposite of what they say!! When I bought MRE most brokers had a sell or hold (polite way of saying sell) recco on it. it was $2.55 at the time... I did my own profit forecast and thought Hmmmm they can reach $5 before the end of the year so I bought them, I did the second valuation once they went past my $5 in record time!! I worked it out purely based on how much they money they had to be making based on information supplied in quarterly reports, wasn't that hard the brokers had eps estimates a fraction of what I came up with!! in the end MRE announced a 500% increase in revenue, and well here we are today The thing is, the highest price they received for Nickel in that first half year was US $20,000 / tone, and there was only one month at that price!! that's why my forecast for the full year profit is higher note it was rough calcs so it could be out either way (I could be too high, or too low).

Tony.

 

[rederob]

September-2006, 01:00 AM
haemitite
Re: MRE - Minara Resources

--------------------------------------------------------------------------

Quote:
Originally Posted by rederob
MS
Please use your brain when you post Comsec forecasts, unless you have the sums to back them up.
The 2007 forecast is based on a lower average nickel price than in 2006.
I personally cannot see that happening, can you?

Yes

Just wondering about that view now?

 

[markrmau]

The metals market is a perfect example of what Richard Farleigh talks about in "Taming the Lion".

Basically RF said that the market was actually pretty inefficient, and that the trend will be continually ignored with market participants always thinking that the price had run too far already.

He says in the end, the peak price paid will surprise all those involved.

So I still maintain, especially for copper right now....people should think about the underlying macroeconomic factors that are present in the world now...

(ie. go long if I am being too obtuse)

 

[michael_selway]

Just wondering about that view now?

Earnings and Dividends Forecast (cents per share)
2005 2006 2007 2008
EPS 12.8 71.4 63.9 60.3
DPS 10.0 37.5 38.0 31.0

EPS(c) PE Growth
Year Ending 30-06-07 33.4 9.1 175.6%
Year Ending 30-06-08 63.9 4.8 91.3%

thx

MS

 

[rederob]

MS
The Comsec forecasts that you originally posted (below) for this year - based on Comsec - has now been revised upwards by almost 100%, based on your above post.
Moreover, their 2008 forecast has been revised upwards by over 200%.

Earnings and Dividends Forecast (cents per share)
2005 2006 2007 2008
EPS 12.8 46.9 33.2 20.8
DPS 10.0 25.5 18.0 11.4

I caution people to be very wary of forecasts - mine included - where the track record is consistently poor.
The question going begging is "why" they continue to err so badly.
The answer on the lips of many bulls is that mainstream economists persistently place the US at the centre of the universe and neglect the role of emerging economies; not just China.
The "stronger for longer" bull camp has a simple view that we cannot curtail the desire of non-Westernised nations to aspire to our living style.
And with a continuing transfer of wealth from the west to "exporting" (eg China) and service provider (eg India) nations, the trend has a long way to run.

 

[PeterPan]

Thanks a lot Wintermute and all you guys. I've been away for work and could not post.
I see your point Wintermute (and I do hope you're right!!). However, I'm not quite sure I have understood the p/e thing. You say that MRE's eps should be around 73c (I agree) and that considering a p/e of 10 this transalates to a price of $7.30. But the p/e is a consequence of the current price, not the other way around. I mean, there are some companies that trade at very low p/e because the market believes they're no good. Why should the market start paying MRE on a p/e of 10 all of the sudden (when they are considering it only to be worth a 8.8 p/e share)? I hope it's clear (sorry guys but English is unfortunately not my first language!).
Thanks again for any light Wintermute and you guys might want to shed on this.
Cheers
PeterPan

 

[wintermute]

Hi PeterPan, I can't remember if at the time I originally did the calculations whether MRE was trading with a p/e of 10 or not... I don't think I just pulled the figure out of the air, but I might have! It could have been high 9's... this is where I should write things down!!! Commsec is currently showing them as having a p/e of 8.86 which I assume is based on their forecasted 71.1c eps....

Also according to commsec their eps for 2005 was 12.8c but at the end of 2005 they were trading at about $1.70 so their p/e then would have been about 13 and that was when they were still having a lot of problems...

Tony.

 

[PeterPan]

Hi guys
Here again to bother you with my questions
Question 1:
You said that Sally’s book is hedged and Minara’s book is not, and I understand that it’s better not being hedged. But, what does it mean that the book (or the production) is hedged?

Question 2:
I’ve always thought that demand drives price (high demand-high price). However, yesterday looking at Minara there were buyers willing to buy 300,000 shares and sellers willing to sell 600,000 and still Minara gained more than 1%!!!!! How does it work?? Shouldn’t have lost???

Thanks a lot for sharing your thoughts with me.

Cheers
Andrea