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In reply to: miningnut on Wednesday 09/07/08 01:49am

OMG i don't want to talk about MRE much, one of my belove nickel producers but hell that chart sux bad.




There is a bounce somewhere there around 2$ but hell i 1st bought this stock at like 9cents(they changed stock numbers after).


From memory MRE was a nickel producer that made big money when the nickel price rose & lost heaps on small falls.


Break even price is a big deal cause they are leaching & stuff.


Ziggy stardust used to run the company(anaconda) then he went from ground control to major Tom & started Foretesque or whatever & I made thousands of dollars on fmg buying at about 36 cents & selling for 42 cents. (if you tell me fmg is now $10+ i will personally come to your house & punch you in the mouth & your father & mother & children then spit on your furniture).


Anyways getting back to MRE , their break even price used to be about 7-8$. They can do that all day for years with big numbers & not make much.


Anything above & they take off like a rocket.





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In reply to: miningnut on Wednesday 09/07/08 12:49am

miningnut, just wondering where you read the $50 mil figure??


I was reading the AFR yesterday and they had $90 mil figure based on a nickel price of $US9 per pound, $AUS exchange rate at US95c and if the price of sulphur remained at these crazy high levels for the whole year.

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In reply to: sjlittle on Wednesday 09/07/08 09:24am

replying to my own post!


Also: Huntley's analysis on 27th june had FY08 profit at $124M and FY09 at $189.5 based on 95c exchange rate at $10 per pound equalling a valuation of $4.85.


Seems to be some debate at the very least...

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In reply to: miningnut on Wednesday 09/07/08 10:34am

Must be this one, thanks.


"COSTS at Australia's two biggest nickel mines, owned by BHP Billiton and Minara Resources, are expected to soar as Chinese demand for sulphur, a key input, pushes prices to a record.


BHP's newly commissioned Ravensthorpe mine and Minara's Murrin Murrin are both understood to need more than 400,000 tonnes of sulphur a year to make sulphuric acid used to break down laterite nickel ore.


Minara's bottom line is expected to be substantially hit by soaring prices when its half-year results are reported in August.


Sulphur prices have risen to about $800 a tonne, from an average of $400 in the first half of the last financial year and about $100 two years ago, because of surging Chinese demand for fertiliser and restricted oil refinery capacity in the Middle East. Sulphur is produced at refineries that process heavy oil such as some produced in the Middle East and that from Canada's oil sands.


On Friday, Minara warned investors of a sharp rise in sulphur costs in the past six months and said it did not expect the sulphur market to get back to a normal cycle until the second half of 2009. Some analysts are expecting it to take even longer.


Analysts responded by slicing their forecasts for Minara's full-year profit by more than 30 per cent, while the market took 16 per cent off the stock's price yesterday, sending it to $2.51, its lowest in nearly two years.


Goldman Sachs JBWere and UBS are each forecasting full-year net profit after tax of $124 million for Minara, down from $276 million reported the previous year.


Deutsche Bank went further, estimating sulphur costs will be the main contributor in reducing Minara's full-year profit to $50 million this year and next.


The bank forecast that Minara, which expects to produce between 31,000 and 35,000 tonnes of nickel this year, will continue to pay $600 a tonne to buy sulphur from Vancouver this financial year, plus about $200 a tonne in freight costs. "We forecast a total sulphur bill of $324 million in 2009, up from about $50 million in 2007," Deutsche Bank analyst Paul Young said.


Despite Minara saying it expected sulphur prices to return to normal, Mr Young said he thought prices would stay high for the next two-to-three years, partly because of refinery bottlenecks.


Increased domestic gas prices are also expected to hit the bottom line, but the main culprit will be gas.


BHP is in the process of ramping up production at its delayed Ravensthorpe nickel mine, which was started in May and has a nameplate capacity of 50,000 tonnes a year.


The company would not say what production has climbed to since commissioning, but acknowledged it was worried about the rising cost of sulphur.


"Because it is an important input, the recent increase in sulphur prices are of some concern and we will continue to monitor the market developments," a spokeswoman said.


Vale's yet-to-start Goro nickel mine in New Caledonia is also expected to suffer under rising sulphur costs."


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Guest mogul

Excellent article, but there is an important oversight.

If sulphur producers can increase their prices, why cant nickel producers increase theirs?

Surely 100% of production is not forward sold at a fixed price for a long time in advance...

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  • 2 weeks later...

Interesting the amount of Nickel stock is falling at the LME, quite sharply over the last couple of days especially. This may be something to do with an article I read last week about Korea increasing the amount of their stockpile from the norm of 19 days worth to 60 days worth. You would think this would be happening a lot in general given the low price so maybe this will force the prices back up a bit.


Here is the chart info:







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  • 2 weeks later...

I just saw today on the tail of the ABC news that MRE was $1.43 I thought WTF something must have happened.... I sold out of MRE in Feb 2007 a tad early, but at around 125% profit... I managed to do that based on the fact that at the time I bought the analysts were so far out of touch with reality that the sp was grossly undervalued, and it was extremely obvious if you read the quarterlys.... It was in fact Rimtalay that alerted me to MRE's existance......


So it is with interest that I see tonight that (apart from the gas supply problem) the main reason the sp seems to have fallen so far is that analysts are predicting massive profit drops due to rising sulpher costs....


I'll have to have a look at the latest quarterly, and hope that MRE still follow the same format that they did a couple of years ago (as they used to have full information about the production costs for the quarter, the tonnages produced, and the prices received, didn't take a rocket scientist to work out what the profit was going to be.... only problem now is that the nickel price has been going down rather than up, I felt much more comfortable buying when the nickel price was heading up, funnily it was around the current price when I first bought in at $2.55 and it seemed a bargain then.



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well I haven't done any substantial caluclations yet, but a quick glance at the 2007 final report (MRE reports on the calendar year) Things don't look good. Profit for the 6 months to Dec 2007 was only 32 million, and that was with an average nickel price of AU $29,000 per tonne... the last quarter the average nickel price was only AU $22,000 This actually equates to a drop of around $30 million in revenue for the period (4361 tonnes of nickel produced X $7000 per tonne less)


The other thing with MRE is that once the operating costs are covered any increases in the nickel price are basically pure profit, so conversely any reduction in the nickel price is directly coming off the profit, so without doing any proper calulations, or thinking this through properly (and not meaning to be alarmist) we could conceivably see that profits have completely evapourated, and MRE is now (for this quarter) in a loss or break even position. This seems a little unlikely and I'd have to do some much more rigorous investigation and calculations to confirm or debunk this, and this is assuming that costs have not gone up!!!!


Certainly it would seem that costs have risen quite significantly if profit with nickel prices at around AU 29,000 per tonne, have seen a profit of only $32 million for the six months to Dec 2007. as it was prices around the 30,000 per tonne mark that led me to buy in 2006, as at that time my calculations showed MRE was likely to make an eps of 73c per share, which turned out (probably more through luck than anything) to be spot on the money http://www.sharescene.com/html/emoticons/smile.gif



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