Stock of the Day – Sirius Resources   (SIR)

Sirius Resources has released the Definitive Feasibility Study for the 100% owned Nova Nickel Project. The DFS reaffirms that Nova represents a compelling project development with low technical risk that remains robust even under bearish commodity price assumptions and ignoring potential exploration upside near mine and within the region. On current timing Sirius expects to have the native title agreement finalized in the coming weeks for the grant of the mining license in August 2014.


SIR Timeline  (Source – Company Reports)

The study was on time and on budget and uses a probable ore reserve of 13.1Mt @2.1% Ni, 0.9% Cu and 0.07% Co, for a Life of Mine inventory  14.2Mt @ 2.30% Ni, 0.8% Cu and 0.07% Co for 285Kt nickel, 118Kt of copper and 10Kt of Cobalt. The two deposits (Nova and Bollinger) are planned to be mined via bulk underground mining methods (83% sub level open stoping and balance from longhole retreat stoping).


SIR Site Layout (Source – Company Reports)

The proposed 1.5Mtpa plant is expected to generate production of 26Ktpa nickel, 11.5Ktpa copper and 850tpa cobalt for separate saleable nickel and copper concentrates over an intial mine life of 10 years. Production levels of nickel have come down slightly from 28Ktpa forecast in the scoping study which is a reflection of an adjusted mine schedule with production tailing off near the end of mine life. 


SIR Daily Chart (Source – Thomson Reuters)

Forecast C1 cash costs (net of credits but before payabilities) are now A$1.66/lb Ni, placing Sirius in the lowest tenth percentile of nickel producers globally. All in sustaining cash cost of A$2.32/lb are an improvement on the scoping estimates. The capex required for the production of first concentrate is A$473m. The updated sustaining capex of A$127m, included forecast closure costs of A$25m which when removed is in line with the scoping number of A$104m. We gave the BUY on Sirius at a price of $2.51on 26/03/2014 under KRR - 110. At the current price of $3.95 it represents a gain of 57.37% and a premium to our valuation. We put a SELL recommendation at the current price of $3.95.

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