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Mirabela Nickel PT Lowered By CIBC After Q1, 'Sector Performer' Maintained

 April 24, 2012 03:30 PM


(By Balaseshan S) CIBC World Markets Inc. lowered its price target on shares of Mirabela Nickel Ltd. (TSE:MNB) to C$0.65 from C$0.75, reflecting the company's actual results and revised guidance, while maintaining its "Sector Performer" rating.

MNB reported a somewhat disappointing Q1 operating results with nickel production of about 3.8kt, down 16% sequential, and below CIBC's forecast. The main factors for the production miss can be attributed to low ore grades from the Central pit, and lower-than-anticipated nickel recoveries.

Positively, Q1 cash costs of $7.37/lb were below CIBC's $7.59/lb estimate mainly as a result of lower shipping and treatment charges. With a leaner work-force, improvements in processing, and higher ore grades, MNB expects cost improvements, which the firm thinks are critical to long-term profitability.

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MNB lowered 2012 nickel production guidance by 5% to 19-20 kt, while maintaining expectations for cash costs to decline to about $6/lb by year-end. Despite the optimistic stance from management, the brokerage expects the market to remain skeptical until tangible cost improvements can be delivered.

CIBC is reducing its price target to reflect the actual results and revised guidance. It continues to believe the long-term profitability outlook at MNB remains linked to the success of cost containment efforts and ultimately improved nickel prices.

The brokerage widened its 2012 loss per share estimate for MNB to $0.11 from $0.07 and its 2013 loss estimate to $0.04 from $0.01.

Mirabela Nickel is primarily engaged in the business of production, development and exploration of mineral properties in Brazil. The company's principal asset is the 100%-owned Santa Rita nickel sulphide mine in Bahia, Brazil.

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MNB is trading up 10.42% at $0.530 on Tuesday.

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