Can Mincor Resources NL generate significant EBITDA and free cashflow?

Team Veye | 26 Mar 2020 ASX - MCR
Can Mincor Resources NL generate significant EBITDA and free cashflow?

Mincor Resources NL (ASX: MCR)

Mincor Nickel Operations Definitive Feasibility Study Results

DFS demonstrates an economically robust project with low start-up capital requirements, a pre-tax IRR of 98%, low unit cash costs and peak annual nickel-in-concentrate production of >16,000t

Mincor Resources NL (ASX: MCR, “Mincor” or the “Company”) on 25 March 2020 announced the results of the Definitive Feasibility Study (“DFS”) on its integrated nickel re-start plan in the Kambalda District of Western Australia.

(Chart source: TradingView)

Key Highlights:

Strong financial returns 

  • Pre‐tax NPV7% of $305m and 98% IRR 
  • EBITDA totalling $585m 
  • Pre-tax and post-tax free cash flow generation of $407m and $315m respectively 
  • Capital payback of 12 months from first nickel concentrate production 

 

Low cost operations 

  • Life of Mine (“LOM”) unit cash costs of operations of $3.36/lb. (US$2.35/lab), with Cassini averaging $2.71/lb. (US$1.90/lb.) 
  • LOM AISC of $4.47/lb. (US$3.13/lb.), with Cassini averaging $3.81/lb. (US$2.67/lb.)

 

132% Increase in Ore Reserves To 65,400 Nickel Tonnes

Cassini delivers a Maiden Ore Reserve of 34,300t of nickel as a cornerstone of re-start plan

Mincor Resources NL also announced a substantial increase (132%) in its nickel sulphide Ore Reserves in the Kambalda District of Western Australia.

The updated Ore Reserves include a significant milestone for the Cassini Nickel Project, with the release of a maiden Ore Reserve of 34,300t nickel (Data Source – Company Reports)

 

Veye’s Take

The Mincor Nickel Operations DFS confirms the potential to develop a 5‐year operation producing 63,000 tonnes of recovered nickel-in-concentrate with relatively low capital intensity, as demonstrated by the estimated pre-production capital expenditure of $68 million and pre-tax IRR of 98%, and attractive financial returns. Based on a forecast nickel price of $10.20/lb (US$7.14/lb, which is largely founded on medium to long term consensus pricing, MNO is expected to generate significant EBITDA and free cash flow at a low forecast all‐in sustaining cost. The updated Ore Reserves include a significant milestone for the Cassini Nickel Project, with the release of a maiden Ore Reserve of 34,300t nickel. The stock appears to be on verge of having moving averages crossover. With RSI already turning up, the stock had a strong green candle. Protecting $0.42 the stock can have the potential to give very good returns in the medium to long term. Veye maintains a "Hold" on “Mincor Resources NL” at the current price of $0.47

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