Tuesday, September 28, 2010

White Cliff Nickel (ASX: WCN)

You could be forgiven for wondering why I would be covering a nickel company on a blog about Gold & Silver stocks! However, if you look further than the name it is soon obvious that WCN is much more than just a nickel explorer. Their self described company profile is:
Gold‐copper and nickel focused exploration company
Identify mineable gold‐copper or nickel deposits
Systematic exploration process
Assess ‐ Acquire ‐ Compile – Soil Sample‐ Drill

Their Gold prospects are the main reason for my purchase, however the other commodities that form part of their focus also add value. Copper was recently covered by The Daily Reckoning as a new "trade of the decade".
A New ‘Trade of the Decade’
He dropped out of the spot light for a while there, but 'Doctor Copper' is making some big moves again. The copper price fell nearly 25% earlier this year after the 2009 rally. But whilst gold hogged the headlines copper has snuck back up the chart again.

It is now only about 3% from hitting a two year high.
Daily Reckoning

Nickel while still far from the 2007 highs is now trading at double it's early 2009 lows and very recently hit a new 4 month high.
Nickel CMNI3 was last bid at $23,200 from $23,250, after earlier hitting a four-month peak at $23,570. 17/09/2010

Before writing about some of their projects I thought I would cover off the basic company numbers:

Issued Shares: 53.6m (tight capital structure)
Issued Options: 33m (Strike @ 25c exp June 2011)
Top 20 Shareholders: 56% (directors 12%)
Share Price: 9.5c (27/09 close)
Market Capitalisation: $5m (not taking into account options)
Cash: $2m (+ further $2m available in JV funding)

WCN listed on the ASX in December 2007 with an initial 25.6m shares at 25c. Over the next 2.5 years they have added significant value through the acquisition (and exploration) of further projects, mainly focusing on those with nickel and Gold prospects. 

The initial fall in share price from listing in 2007 can in part be attributed to a fall in the price of nickel which fell from almost US$25/lb in mid 2007 to a low of under US$5/lb in early 2009. 

With much added value today the share price still lingers below the market capitalisation at time of listing. Given the Gold bull market we are in I can only assume that under the radar micro-cap juniors like WCN will eventually be re-rated and priced with the potential that they contain.

In May 2008 a JV with Daewoo International Corporation and Korea Resources Corporation was announced where $5m in funding would be provided in exchange for a 50% interest in the project. Later that same month it was announced that a new nickel/Gold project had been acquired at Lake Johnson. In February 2009 WCN secured 100% ownership of the Mt Remarkable Gold project, following this in late 2009 the Kelly Well Gold Project near Laverton was acquired. In May 2010 an agreement was reached to obtain a 45% interest in a Gold/copper project in the Kyrgyz Republic (Chanach). 

It was an announcement from the most recently obtained project that today sent the share price 22% higher to a new 52 week high.
White Cliff Nickel shares spike on copper discovery at Chanach Project

White Cliff Nickel (ASX: WCN) has reported that channel sampling across the first bulldozer trench completed at Chanach has identified a zone of copper mineralisation with a high grade core of 28 metres at 1.02% copper within a mineralised halo of 45 metres at 0.94% Copper, including a peak channel sample value of 3.24% copper.

In addition to the "outstanding" result in the first trench, extensive copper alteration zones have been identified in bulldozer trenches over a 450m distance rock chip sampling has identified high grade gold and copper results up to 26 g/t gold and 6.1% copper.

Proactive Investors

There has been political unrest in Kyrgyzstan after the country's President, Kurmanbek Bakiev was ousted in April this year, however in June a referendum was held supporting a constitutional change that would make Kyrgyzstan a parliamentary democracy. The election is to be held October 10th and the expectation is that it will add stability to the region.
Obama Administration Gives $5 Million for Kyrgyz Elections

Washington — The Obama administration has allocated $5 million to help Kyrgyzstan organize its October 10 parliamentary elections, which U.S. officials hope will be free and fair and will include wide participation from the Kyrgyz population as the country continues to recover from ethnic violence earlier in the year.


This is positive news for companies who have projects in the region and I suspect it's likely that the political unrest has been the reason that the market has not priced this projects potential into the WCN share price.

Further to the Chanach project, where a further 600m RC drilling program is planned over the next two months, WCN is also planning drilling at their Mt Remarkable & White Cliff projects (November - December).

A brief summary of WCNs tenements shows the highly prospective nature of their projects:

Chanach (Gold and Copper) Project (45%)
• 93 sq km in the core of the Tien Shan gold province.
• Historical sample grades:
  - Gold grades up to 40 g/t
  - Copper grades up to 5%
• Within 100km of major gold deposits containing between 3 and 93 million Oz gold and 1‐25Mt copper

Mt Remarkable (Gold and Nickel) Project (100%)
• The project covers 266 square km
• Historic gold results of:
  - 5m @ 1.91 g/t gold
  - 16m @ 1.07 g/t gold

Laverton (Gold and Nickel) Project (100%)
• 1200 sq km of greenstone terrain
• Significant gold results of:
  - 8 m@ 8 g/t Au in basalt
  - 4m @ 5 g/t Au in sediment

White Cliff (Nickel, Gold & Uranium) Project (50%)
• Covers 1400 sq km
• New Greenfield nickel discovery
  - 20m@ 1.0% nickel
  - 1m @ 2.1% nickel

Lake Johnston (Nickel and Gold) Project (100%)
• Extensive historical nickel assays at Lake Johnston
• 352 assay > 0.5% nickel inc;
  - 8m @ 0.98% nickel
  - 4m at 1.32% nickel
• Previous gold results of:
  – 1m @ 8.68 g/t
  – 3m at 1.72 g/t

Oakover River (Iron and manganese) Project
• Approximately 970 square km
• Potential iron and manganese mineralisation in an under explored area

Exploration companies can be difficult to put a value on, but in my opinion the WCN share price should be much higher than it is currently. It's barely priced over the cash and JV funding available. The nature of the payments for the Chanach Project indicate a resource of 2 million ounces of Gold or higher is possible (of course there are no guarantees) and their other projects clearly have potential for mineable deposits.

Given the illiquid nature of WCN the chart doesn't provide too many clues, however if 9.5c holds we could see this turn into a level of support with the October 2009 high touching this level before retracing.

I would say for the time being WCN does not provide enough liquidity for day trading, however value investors and swing traders should consider the potential. With several drilling projects in the months ahead and a rising price of Gold I suspect that the market cap will be multiple of current in the not too distant future.


Disclosure: Position held in WCN. Not investment advice. Do your own research.

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