Axiom Mining progresses with approvals and finance at Isabel Nickel Project
Shares in Axiom Mining (ASX:AVQ) underwent a substantial rerating on Friday after the company announced that it had made substantial progress in gaining government approval and licensing in relation to the Isabel Nickel Project located in the Solomon Islands.
It should be noted that share trading patterns should not be used as the basis for an investment as they may or may not be replicated. Those considering this stock should seek independent financial advice.
As the chart below demonstrates, the company’s shares had come off over the last six months, largely due to the licensing procedure taking a little longer than some may have anticipated.
However, the extent of Friday’s rally highlights the significance of this event, which along with news regarding funding has provided clarity and predictability regarding the progress of what is considered by some analysts as a world class nickel project.
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It is worth noting that Friday’s rerating occurred under the second-highest daily volumes traded in the last 12 months. The only prior occasion in the last 12 months when more than 5 million shares were traded in a day was towards the end of June 2016. This proved to be the commencement of a larger sustained rally which saw the company’s shares triple in value in less than a month.
Whether the current set of circumstances can support a similar rerating remains to be seen, but the focus should be on the importance of these events, summed up by Axiom’s Chief Executive, Ryan Mount who said, “I remain confident in the delivery of our initial licensing objectives, enabling us to harness our expert team’s commitment to project development in order to realise significant value from this world class nickel project in the Solomon Islands”.
Mount noted that negotiations were in an advanced stage with the government, and that initial funding is in place, and landowner partners were steadfast in their support for the project.
A promising development was the take-up of a $1 million rights issue shortfall facility by one of the company’s largest shareholders, InCoR Holdings. In addition, the company has also secured a further $4 million via a convertible note, $2 million of which is immediately available with the other $2 million accessible in October.
Axiom poised to commence production in 2017
These developments have significantly derisked the Isabel project which could potentially move to small-scale production in 2017, increasing to 1.5 million tonnes in 2018 and 2.2 million tonnes in 2019.
Applying these metrics, analysts at Beaufort Securities are forecasting AVQ to generate a net profit of $3.7 million in fiscal 2018, increasing to $21.3 million in 2019, representing earnings per share of 5 cents.
This represents a PE multiple of approximately 6 relative to the broker’s share price target of 31 cents, which implies share price upside of nearly 100% based on AVQ’s closing price on Friday.
The following investment summary provided by Beaufort Securities in January 2017, along with its production projections makes for interesting reading, particularly given that it rates the project as ‘the best undeveloped nickel laterite project in the Pacific’.
Axiom controls one of, if not, the best undeveloped nickel laterite project in the Pacific with plans to fast track production over the next 6-24 months. If all goes well, Axiom will be a 2.2Mt nickel laterite producer by 2H19, and at current nickel laterite prices this should produce annual revenues of A$150m and Axiom EBITDA of A$50million adjusted for 20% local ownership.
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