🕐26.07.12 - 09:54 Uhr

INVESTEC: ENK - ENK’S CASH LEAVES IT UNDER NO PRESSURE - BUY



ENK (ENK.L) Investec Securities Price: GBP 12.9 | Target: GBP 29.0 | Rec: Buy ENK’s quarterly production update confirms that the company remains firmly on track for completion of the Acoje BFS by the end of September 2012.

Cash-flows from ore sales (now completed) and investments have enabled ENK to maintain a comfortable cash position of $30m, leaving it under no pressure to rush decisions post completion of the BFS.

That being said, product off-take (part financing) could coincide with completion of the BFS. ¢ Direct shipping ore (DSO) sales during the quarter realised cash of US$1.4m, which together with sales of investments, leaves ENK with $30.3m cash, with only $6.5m still required to complete the BFS.

Additional contracted cash receivables of $11m leave ENK in a very comfortable financial position. ¢ On-going off-take discussions for the Acoje product appear to be proceeding well and the company states that these could reach a conclusion even as the BFS is completed.

Parties in advanced negotiations have received test samples of ENK’s product.

¢ ENK states that it intends to finance Acoje’s development through a combination of bank debt and equity and that the off-take arrangements should form a “significant part” of the equity financing requirements.

This could therefore minimise the overall quantum of shares to be issued as part of the overall equity financing. ¢ We value ENK by means of peer group comparison, based on value per contained tonne of nickel in the ground, adjusted for ENK’s cash balance.

The resultant valuation remains at 29p and forms the basis of our target price. ¢ With completion of the Acoje BFS, we will look to incorporate an Acoje development scenario into our financial estimates and establish a target price underpinned by an NPV. ¢ To access the full note please click here Analyst: Hunter Hillcoat To receive further information or change your Research Preferences please email: South Africa or United Kingdom IMPORTANT NOTICE: This communication forms part of an electronic communication sent to the intended recipient (or such persons authorised representative) for their sole use and is subject to important legal and regulatory restrictions, qualifications and disclaimers ("the disclaimer") that may be accessed and read by clicking on the following hyperlink:http://www.investec.co.uk/about-investec/what-we-do/investment-banking/investec-securities/company-research/morning-meeting-comments.html or copying the address into your Internet browsers address bar.

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