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#MCR/Nickel Bull Case
Last edited 3 months ago

17-May-2020:  Mincor are a nickel producer that is not currently producing any nickel, due to the low nickel price.  I'm personally not too bullish on nickel in the immediate short-term, however nickel prices will certainly recover at some point when the outlook for global growth improves.  That could be some time away, so the big question is how long can a company like MCR survive without any revenue?  According to their latest Quarterly Cashflow Report (for the March 2020 quarter), at their current cash-burn of $3.6m/qtr, they can last about 3.5 years (or 14 quarters).  That's a pretty healthy position to be in actually.  They had net cash of circa $52 million at March 31.  Their SP has already recovered most of its March losses, so they aren't as cheap as they were in March, but if you're bullish on nickel, and you are also prepared to be patient, you could do worse than to invest in MCR. 

I am unlikely to do so personally, because I prefer to play nickel via current producers like IGO & WSA, and I don't hold shares in either of those companies at this point in time, because I believe copper is more likely to recover before nickel, and I can't invest in everything;  So I have a position in Sandfire (SFR) for copper, and my next cab off the rank would likely be IGO, because they produce nickel and copper.  I also maintain a core position in South 32 (S32) which are a diversified miner that do own and operate a large nickel mine, the Cerro Matoso open-cut mine in northern Colombia, one of the world’s major producers of ferronickel.  That's not the primary reason I hold S32, but I don't mind the nickel exposure.  S32 also produce met coal (metallurgical coal, they also currently own some thermal coal mines but they are in the process of selling them off), silver, lead, alumina (which they smelt into aluminium), manganese and zinc.

Nickel is a metal whose main use is in stainless steel.  Stainless steel that includes nickel is used in the food processing, transportation and manufacturing industries.  As stainless steel is heat-resistant, hard to damage and easy to keep clean it is commonly used in everyday household items, especially in the kitchen, like bench tops and pots and pans.

Nickel-containing products play an important role in our daily lives. Compared with other materials, nickel-containing products possess better corrosion resistance, greater toughness, more strength at high and low temperatures, and a range of special magnetic and electronic properties. Therefore, most nickel production is used for alloying elements, coatings, batteries, and some other uses, such as kitchen wares, mobile phones, medical equipment, transport, buildings, power generation and jewellery.

The use of nickel is dominated by the production of ferronickel for stainless steel (66%). However, it is also used in the production of non-ferrous alloys (12%), alloy steels (5%), plating (7%), foundry (3%) and batteries (2%).

More reading:

MCR March 2020 Quarterly Activities Report

MCR 02-Apr-2020 Corporate Presentation

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