Kagara opts for safety first
Michael Quinn, 15 December 2011
IT WAS not in the script and all things being equal the market may not cut Geoff Day and his board and management a great deal of slack from here on in, but Kagara’s $A25 million raising looks a completely justifiable and wise reaction to highly uncertain macro circumstances.
In a nutshell, with volatile, skittish world markets and consequent uncertain commodity prices, the raising ensures Kagara now has a buffer or “insurance policy” to best manage any stormy weather ahead.
In addition the upcoming wet season obviously presents a literal storm danger to Kagara’s operations in Far North Queensland, albeit that given this is part and parcel of the Kagara business, it is probably only extremely unusual weather that could be legitimately used as an excuse in the case of significant underperformance.
The cash buffer should also ensure the company reaps the best possible return on disposal of its nickel assets, rather than risk the possibility of trying to do a deal under duress.
UBS recognised the raising as justified.
“We maintain a ‘buy’ rating on Kagara with the belief current management can deliver on their five year growth objective,” UBS said. “The equity raising helps de-risk growth plans which are heavily reliant on exploration success and new mine development. The sale of Lounge Lizard has the potential to provide further growth and funding flexibility.”
Goldman Sachs though is a little concerned about future funding.
“While we do accept that the current five year strategy for Kagara is the right thing to do we are cautious about the funding of this large exploration package which is required to increase the resource and reserve base and expand the life of existing (and to include the Mungana plant; half built ... ) operations,” Goldman Sachs said.
“The company will remain exposed to any potential weakness in base metal prices driven by current market concerns around Chinese demand, and will remain reliant upon monetising one (or both) of Lounge Lizard and Admiral Bay.”
The latter (sale of Lounge Lizard) has been flagged since the five-year plan was unveiled.
Also in the December 15 - 21, 2011 edition
- AFRICA
- Eritrea risk narrows Zara field
- ASIA DESK
- Not all good as gold in China
- AUSTMINE
- MST buys Nixon Communications
- BREAKING NEWS
- Abenab progress for Avonlea
- Alara advances
- Alcoa declares divi
- Alcyone search boost
- Better news for St Barb
- Black Fire complies
- Bu Dun Hua copper
- Chief sees higher rating for Endeavour
- Cockatoo extension
- Impala sacks drillers
- Industrea win
- Kingston shines
- Maiden Rosie resource
- More Bass trouble
- More concerns on uranium supply
- Nany option exercised
- Newcrest output up
- Palito reassessment
- Pegasus finds copper
- PGM output up
- Radar on track
- Redhill expands holding
- Rio in control
- River attraction for Silver Lake
- Southern Cross ready to move forward
- Stonehenge sets sights high
- Straits gain
- Strategic permit
- Tanoyan update for Reliance
- Trafford's exploration boost
- Two Rivers death
- Ventnor copper hits
- WA uranium policy
- West Rand mines to merge
- Windfall at lake
- Winmar attracts investor
- Yellowhead on track
- CENTRAL ASIA
- Can miners really side-step a war?
- COAL
- Mardon's new year wish
- CONSULTING
- Consultants see room to grow in 2012
- Lory leads SKM mining into new growth phase
- CONTRACTING
- Contracting briefs: Redpath, Thiess, Decmil
- FINANCE
- A golden path to Dubbo development
- Copper deficit a fixture for the future
- Money’s almost too tight to mention
- Terramin view expected to become clearer
- FORUM
- How the JORC and Valmin codes work
- More must buy into JORC discussion
- FROM THE CAPITAL
- Capital management will be key 2012 theme
- GOLD
- Loyal to the cause
- Upside seen despite Teranga downslide
- HEAVY METAL
- Atlas Copco expands mining range
- ISSUES
- State-run miners: best of a bad bunch
- MINING
- Independence gloom unwarranted
- MINING INTELLIGENCE
- 'tis the season (still) to be wary
- MINING IT
- Auto-money changes everything
- Innovation is the new black
- IT notebook: ARANZ Geo, Immersive Technologies
- IT notebook: Devex receives certification
- IT optimists
- Mining IT: 2011 rebooted
- Mining IT: product releases to fill 2012 calendar
- XPAC to lead dynamic software revival
- PEOPLE
- People on the move: Gindalbie Metals, Abcourt Mines, Carbon Energy
- SOUTH AMERICA
- Chili backers like its prospects
- VIEW FROM THE WEST END
- Bitten on the bum by a Black Swan
