FXR 0.00% 0.2¢ fox resources limited

fox resources - good value on 6month view?

  1. 2,218 Posts.
    A lot of Nickel stocks have run hard over past months. Arguably, it is getting more difficult to find value. One of my value favourites (for the patient) over 2003 has been Fox Resources (FXR). This has generally traded between about 19 and 25c. FXR is aiming to complete a bankable mining study on certain sulphide resources at Radio Hill, bought from Titan last year. Titan retains a 1% royalty. In the July market update, FXR are forecasting an initial mine life of 3 years with production at about 4500 tpa nickel equiv, giving cashflow of AUD15 million pa (assumptions Ni USD8500t, Cu USD1700t, FX 66c).

    Current market cap is a bit over AUD6 million (27 million shares on issue, all quoted), about 0.75m cash left. I think that will need another smallish cap raising (say 5 million shares) to get them to December when the mining study is completed. They have recently taken on an investment bank as a significant shareholder, which suggests to me that this is a prelude to a debt facility or similar to supply the capital to get Radio Hill back in operation during say 2nd quarter next year.

    A new round of drilling is due to start mid this month. I’m not expecting anything startling, but it will be interesting if the F-zone referred to in the July quarterly can be expanded. Assuming the progress of the mining study doesn’t throw up any nasties and the 2004/05 nickel price forecasts remain reasonably strong, I would expect study appreciation of FXR from its current (21.5c) price towards the end of the year and early next as the various risk factors are discounted. Of course FXR will only be a minnow, but there seems to be enough money to be made to see capital appreciation plus fund exploration without the need to expand the share base. There are FXROs (20c exercise, 2006 expiry) for the bolder traders.

    Just my view.

    Angus

    I hold FXR and have been accumulating on pullbacks
 
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