Canico rocket gains more altitude
By: Tim Wood
Posted: 2003/05/12 Mon 14:57 EDT / © Mineweb 1997-2003
NEW YORK -- A favourite Mineweb stock, Toronto listed Canico Resources [CNI], has punched through our most conservative valuation of C$7.40. The move came on Wednesday when the price rocketed 17% after further strong drill results were released.
The stock has more than doubled since we identified it as a potential wealth generator in late January at C$3.80; the all-time high so far stands at C$7.95 and American investors have additionally benefited from the appreciating Canadian dollar.
Canico’s primary risk is the nickel price which is in many senses hostage to Norilsk Nickel [NILSY.PK]. The Russian metals miner and marketer has recently been releasing stockpiles of “collateral nickel” which are projected to place the market in surplus this year. The nickel stockpile was used to collateralize a three-year, $200 million loan.
So far, Norilsk Nickel has disgorged 36,000 tonnes and has around 25,000 tonnes still stockpiled. The actual figure may be higher based on past underestimations of the company’s hoarding. Furthermore, Norilsk Nickel intends raising production for the next several years.
Norilsk Nickel’s supply quelled a strongly running nickel price that had run from just over $7,000 a tonne to more than $9,000 a tonne from January to late February. That was driven by reported shortages although prices have since stabilized in a range around $8,000 a tonne, or about $3.60 per pound.
Given the latest drill results, current nickel prices and presumed dilution required to bring the project to account, Canico now looks reasonably priced between C$12-14 per share. Even if the nickel price were to slip to $3 per pound, then the fair value is probably still close to C$10. Clearly, investors who bought in when we first brought Canico to attention should consider their profits at this point.
The share price is the primary value driver for Canico at the moment since it will determine the extent of dilution shareholders will suffer in carrying the capital burden for construction and commissioning.
No Mineweb staff own the stock.
FP........................................................
