Is Mirabela Nickel a Takeover Target?

Mirabela Nickel Ltd. (MRBAF.PK) has been widely lauded by investors and analysts for its Santa Rita project in Brazil, which is considered the best greenfield nickel project around. UBS Securities analyst Onno Rutten visited the site recently, which only affirmed his belief that Santa Rita has great promise.

He likes the fact that it is very low risk - a rarity in the nickel business: it is an ordinary nickel sulphide project that can be mined with a basic open pit, it is fully permitted, there is plenty of regional infrastructure, and little country risk. Plus, there is plenty of exploration upside, with the potential for an underground development below the open pit in the future.

This all makes Mirabela an attractive takeover target, in Mr. Rutten's opinion. However, he points out that the stock is tightly controlled, with insiders holding 13%, Australian seed investors holding 15%, and Vale Inco holding another 6%.

In a note to clients Mr. Rutten wrote:

We continue to believe that a hostile takeover during the current exploration/development stage of Mirabela would have limited probability of success and we therefore do not assign any takeover premium to our [Mirabela] valuation.

He rates the stock a "buy" with a price target of C$7.75 a share.

Santa Rita is expected to go into production in mid-2009.