Having recently taken a stake in MRE I have been reading some...

Having recently taken a stake in MRE I have been reading some documents including the 2008 Annual Report. The 5 Year Summary on Page 16 of the AR painted an interesting picture. Looking at the range of data from 2004, the company’s earnings were not that fantastic in 2004 and 2005 which is comparable to 2009 (second half profit expected) and the share price moved between $1.56 and $3.60. As the nickel price soared the MRE SP hit $9 (albeit with a much lower share base than today’s).

The cyclical nature of metal prices and the associated under/over investment in infrastructure during downturns/booms is well documented. When Ni moves up to US$9+ a lb as the commodities cycle turns again we are going to see a massive re-rating in unloved stocks like MRE. What I like about MRE is:

1)No funding/financing risk,

2)MRE management is operating conservatively (we now know that their JV bid for Ravensthorpe failed which I saw as a positive as they made a lowball conservative bid rather than being cowboys),

3)Production is steady and operations are stable,

4)Management are walking the talk and acting upon their promises (I am tired of reading announcements/reports of other companies with a string of non-delivery of previously published promises/targets.

5)MRE is yet to join other metals and nickel players in strong SP appreciation (e.g. MCR) although the fundamentals/cash costs at MRE do not seem to be inferior.

6)I expect that Glencore may be thinking about taking over MRE to simplify its ownership of the project which is already significant.

I can actually sleep at night while holding MRE.