Morning Mumble: Viability & Pricing (CEY) & Dreamland Horizonte Minerals (HZM)

Centamin presented an opportunity to walk in light of the price movement, I'd be surprised if people can warrant a higher target price save for the takeover rumours etc...bizarrely the price stepped up 10% (or near it). Well the market likes the odd blinker...to ignore the issues.

Horizonte Minerals, A stock I've had a few plays with over time, has published its Pre-Feasibility Study (PFS) that confirms economic and technical viability for Araguaia Nickel Project, Brazil. Now I hope you note my sarcasm here, but anything is viable on paper if you factor in "better anticipation and expectation" in the market place.

You read through it, like me, I won't try and pretend to understand the more complicated "schpeel," but what I do know is there are 2204.62 lbs in a tonne, and that makes my assessment easy! They're forecasting $19K/t a price that may well be achieved in the near future due to the Indonesian ban. However by the time the mine comes into production, its my view if the "ban" has not been modified, then its likely future supply will not be constricted. A ban by Indonesian currently and the price is range $7.2-$7.35/lb currently. You're thinking, this is the "PFS" there could be some modifications in the Bankable Feasibility Study, albeit HZM will need, ermmmm, cash for that part. 

When you balance it in, you should derive like I a Nickel price of 8.618265279277154$/lb. Sorry but you get the idea...it's only  modest $1.30/lb above the current price which I suspect will rise with further tightening of supplies around October. All positive, but all the same, I always thought you were meant to sell projects on past economics with "headroom" and cream for an increasing price. Am I wrong here?

Well with an average price over 20 years of say 15,000$/t or 6.803893641534596$/lb. I think I am being generous there, but guessing at the average without currently having access to the stats. You get the idea, its "only" 19% above the 20 year average, admittedly things have changed and it has peaked before at $53,000/t or just over $24/lb there's potential but at least be conservative with the pricing and expectations.

For the HZM holders, with the larger shareholders having 75% of the stock it'll be down to them to determine viability. Assuming one doesn't have rose tinted glassed they'll look for improvements in these economics at the BFS stage. Assuming they decide to go that way and not spin the project out to someone with deeper pockets at say 12pence a share "to keep some happy."

One of the mysteries in the market I have to say, assuming that all things remain equal there would be more upside in a Nickel long than there would be in HZM post a rise to 9p. Rather simplistic approach from myself but that's how I work.

ABM on the bank and just waiting to be clubbed by Creditors it would appear: Albermarle & Bond (ABM) Update on discussions with lenders. One begs to question what sort of discussions there were/are in light of the response: the lender "will not be able to support the management turnaround plan for the business The Board is continuing to work with the Company's lenders on possible alternative options for stakeholders."

So shareholders, pay up, or 'new shareholder' pay up and discount all the way. One thing is for certain, the leveraged model across the entire market whether it be Gold, Silver, Nickel (TALV) etc...does not work for parties thinking or considering it to be low risk. However it's positive for the press. They have been able to retrospectively write about what "was clearly and matter-of-factly" coming. 

Faroe Petroleum PLC Preliminary Results had a tone of consolidation. Perhaps the market will follow suit: Financially, with the positives coming for the company and development results should grow. There Net Cash situation is certainly a benefit and prudently (so far) spent and reserves being upgraded. The key to for me is the RBL (Reserves Based Lending) not burning a hole in their pocket and one will assume that will be prudently spent!

My long (Leggie sit down) on Kingfisher paid well, it’s a rarity for myself to go into results with full exposure. Kingfisherreports full year adjusted* pre-tax profits up 4.1% to £744 million and the markets somewhat surprised by the capital return programme. It boded well for the SP, for myself the longs are banked, purely as I do like to run a sensible operating rule of making a profit! One will await the ‘consensus’ before taking further positions, long or short…

Atb Fraser