With nickel prices on the rise UBS analyst Onno Rutten says pure play nickel companies left standing in the wake of recent consolidation in the sector offer very attractive opportunities for investors.
His positive prognosis for the sector is predicated on several characteristics in the nickel industry including the high degree of industry consolidation and relative scarcity of pure-play nickel equities. He also notes the high barriers to entry caused by the decline in high-quality resources and the growing dependency on high risk technology.
Rising nickel prices tip the bullish scales even further, and Mr. Ruttan told clients he expects the upward trend to continue.
In a research note he wrote:
We believe that nickel prices are structurally supported by marginal industry costs; moreover, nickel could be an early-cycle beneficiary of an economic recovery.
Mr. Rutten recently initiated coverage on Mirabela Nickel Ltd. (MRBAF.PK), and assumed coverage for FNX Mining Co. Inc. (FNXMF.PK) and Skye Resources Inc. [SKR/TSX]. He rates FNX a "buy" with a C$39 price target, Mirabela a "buy" with a C$7.50 price target, and Skye a "neutral' with a C$8.25 price target.
He said:
We prefer FNX because of its producer status and aggressive near-term growth, whereas we prefer Mirabela based on its attractive valuation and near-term development and exploration catalysts.
