Macquarie initiates on Mincor, pointing to a ‘Kambalda awakening’

Investment bank Macquarie has joined a growing list of top-end brokers and institutions to initiate formal research coverage of nickel developer Mincor Resources (ASX: MCR), issuing an “Outperform” recommendation and 85c 12-month price target
15th May 2020
Resources Rising Stars

Investment bank Macquarie has joined a growing list of top-end brokers and institutions to initiate formal research coverage of nickel developer Mincor Resources (ASX: MCR), issuing an “Outperform” recommendation and 85c 12-month price target.

Macquarie’s initiation report follows hard on the heels of Sprott Equity Research and Shaw & Partners, both of which have commenced coverage over the past two weeks – joining institutional brokers Euroz and Petra Capital, both of which have been covering the stock for some time.

According to respected Macquarie Research analyst Hayden Bairstow, Mincor is on track to resume nickel mining at Kambalda in FY22 based on a multi-mine restart plan underpinned by the Cassini, Long and Durkin North mines.

“The consolidation of Long with Durkin North has created a low capital restart option, underpinned by a new greenfield mine at Cassini which is expected to account for +50% of group production,” Bairstow wrote in his detailed initiation note.

“Our development scenario for the Kambalda restart delivers an annual rate of ~15ktpa of nickel in concentrate for five years with concentrate production commencing in 3QFY22. AISC are expected to average US$3.50/lb over the life of the project.”

He says the restart plan is focused on bringing three separate mines into production in the first phase of development, with initial production commencing at Long and Durkin North, located close to BHP’s Nickel West Kambalda concentrator which will treat all ore mined under a 4-year toll treatment agreement.

Bairstow says Mincor has $52 million in cash with an estimated pre-production CAPEX of ~$70 million and maximum cash drawdown of ~$100 million. “We expect Mincor will to secure an additional $80 million in funding to achieve first production while maintaining a strong focus on exploration,” he said.

“We believe there is significant upside potential to our base case production forecasts for Mincor through exploration success,” the note continues.

“Recent drilling at Cassini has already suggested that a down-dip extension of the current resource is likely while a parallel target at Cassini North also offers upside potential.

“The consolidation of Long and Durkin North will allow Mincor to explore the area between the two mines for the first time.

“Mincor also boasts a large resource base of 188kt of contained nickel.The resources are in 15 unique deposits, which include the Cassini, Long, Durkin and Miitel/Burnett mines, which form the base of our development scenario for MCR.”

Macquarie’s valuation of Mincor is 85-86c, with 20c of the valuation ascribed to resources not included in its production scenario to capture some of the exploration upside potential.

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