Their recent history has been around US$5.00-5.50/lb costs.
Yowie013 expects our costs to be increased because of rising sulphur prices, but increased production should also decrease our costs per lb. So lets say costs will be $5.25/lb in 2011 or worst case $6.00/lb (both guesses). Production was 27,000 tonnes in 2010 due to two unexpected shutdowns and one planned shutdown. With no unexpected shutdowns in 2011 we could see 35,000-37,000 tonnes of production, 33% higher than 2010.
Yowie says that MRE's costs are mainly fixed costs, so 33% higher production would presumably decrease costs per lb significantly.
Today nickel is $12.88/lb. So far in 2011 nickel has averaged $11.90/lb.
$11.90-$5.25 = $6.75/lb gross profit margin
36,000 tonnes * 60% (our share of Murrin Murrin production) = 21,600 tonnes / 47,600,000 lbs $6.75/lb * 47,600,000 lbs = $321m gross profit distributable income = $321m minus 30% tax, minus CAPEX
Today's market cap - $1.02b
The big assumptions - nickel prices holding at these levels for 2011 and MRE meeting the high end of their production guidance.
MRE Price at posting:
87.0¢ Sentiment: Buy Disclosure: Held
