Brokers set $1 price target for nickel developer Mincor following latest reserve upgrade

20th August 2020
Resources Rising Stars

Amid the welter of financial reports released this week, Mincor Resources (ASX: MCR) gave the market another strong signal that it is firmly on track with its nickel restart plans in Kambalda, issuing a project update which was welcomed by analysts at two leading broking firms.

Mincor unveiled a 17% upgrade in the reserve for its flagship Cassini deposit to 1.21Mt at 3.3% Ni containing 40.1kt of nickel in ore, an increase in both contained nickel tonnes and grade.

At the same time, it reported a further significant drill intercept of 3.5m at 7.6% Ni and 0.7% Cu from in-fill drilling, which is outside the current reserve but within the resource, and announced the award of an early works package to its contractor, Pit N Portal.

Macquarie Equities quickly issued a flash note with a $1.00 price target and Outperform recommendation for the stock.

Macquarie analyst Hayden Bairstow said he believed the award of the early works contract was a precursor to formal board approval being granted and decline development starting at the company’s Durkin North mine.

“The upgrade to the Cassini reserve was an important de-risking step for Mincor as the entire Cassini mining inventory outlined in the Definitive Feasibility Study is now contained in reserves,” he wrote.

“We note that our development scenario for MCR already incorporates a larger mining inventory, however post the reserve upgrade we now assume only 12% additional nickel tonnes at Cassini over and above the reserve.”

Meanwhile, he notes that down-hole electromagnetic surveys have confirmed a potential extension up to 75m down-plunge at Cassini, suggesting “upside risk” to the resource estimate.

“The exploration success confirmed the potential upside risk to both reserves and resources at Cassini,” Bairstow wrote.

Mincor will no doubt be hoping for plenty more of this sort of “upside risk”!

Sydney-based Shaw & Partners also weighed in, with a flash note from resource analyst Andrew Hines in which the company maintained its BUY recommendation and upgraded its price target to $1.00 on the back of the reserve upgrade.

Shaw & Partners initiated coverage earlier this year with a $0.95 price targets based on its plans to re-establish nickel production in the Kambalda region.

“Nickel is a key metal in the manufacture of lithium ion batteries and demand is expected to increase due to the electrification of the light vehicle fleet,” Hines wrote earlier this year.

“Mincor’s nickel concentrate is likely to end up in nickel sulphate following BHP’s production plans.

“The nickel market appears under-supplied in the medium term, especially nickel sulphides, and we forecast a 50% increase in the nickel price (spot US$5.10/lb) to an incentive price of ~US$7.50/lb once the COVID-19 demand shocks abate.”

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