Mining Buy Stocks Minara Resources (MRE)


Minara Resources ASXS MREMinara Resources (MRE) is a leading Australian resources company, one of our country’s top three nickel producers and one of the top ten in the world. Based in Perth, MRE operates the Murrin Murrin nickel cobalt JV project (60% Minara, 40% Glencore International AG) which is situated in the northern goldfields region between the towns of Leonora and Laverton.

MRE had a tough time over the course of the global economic downturn, as did all global equities, though unlike many others the miner failed to come into 2010 on a strong note.

However, MRE has entered 2011 in a more robust position, being one of the hot stocks throughout December.  Soaring nickel prices has benefitted the miner, which recently reported rising profit and revenue for 1H10 and a respectable December quarter result.

About face

MRE showed signs of turning around its stock slump of recent years last August, when it reported its 1H10 results.

The group swung to a 1H10 net profit of $39.8 million, compared to a $3.1 million loss a year earlier.

Revenue jumped 23%, even as nickel production at MRE’s Murrin Murrin operations fell due to a pipeline failure on 25 May.

The company’s balance sheet was also in healthy shape, with no debt, and $363 million cash on hand at June 30.

MRE did not declare an interim dividend, and maintained its full year production guidance at the lower end of 30,000 – 34,000 tonnes of nickel.

Nickel finds its niche

Nickel is no longer considered to be one of the lagging base metals, with the metal outperforming its peers over recent months.

Whilst last week saw declines for base metal prices across the board, nickel managed a gain for the week (+1.1%) on rising demand and firming overseas trends.

Going ahead, nickel prices are expected to continue gaining traction. Broader strength for base metals overseas, better-than-expected US economic data and strong demand from alloy makers are all factors supporting the upside in nickel futures.

A stronger nickel market and improving operations led MRE to upgrade its Murrin Murrin 2011 output to 33,000-37,000 tonnes (on 9 December).

Production update

On 14 January, MRE released its results for the quarter ending 31 December 2010.

For the quarter, total production of 6,508 tonnes of packaged nickel and 448 tonnes of packaged cobalt was achieved at Murrin Murrin.

As anticipated, metal production was impacted by a three-week, planned triennial statutory shutdown. The plant recommenced production without incident over the quarter.

Minara Resources cash on hand at 31 December 2010 was $225 million (up from the September quarter result of $220 million).

The miner is set to release its quarterly activities report on 31 January.

Outlook

In its recent quarterly results, MRE re-confirmed its upped December guidance for Murrin Murrin 2011 output of 33,000-37,000 tonnes as nickel prices gain traction.

Though the quarter featured a planned plant shutdown, MRE has confirmed the plant has recommenced production and the company identified no foreseeable maintenance issues for the future.

Though the stock has struggled over the last few years, the major turnaround for nickel price puts Minara Resources in good stead going into 2011, making it one of the stocks to watch in coming months.

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