2008 Media Releases

Deutsche Bank has initiated coverage of the Australian nickel sector with a positive medium term view but cautious near term outlook.

The Australian nickel sector, which has a combined market cap of around A$6 billion, is dominated by approximately six mid tier producers operating primarily in Western Australia. Of these, Deutsche Bank has initiated coverage on:

Mirabela Nickel (ASX: MBN) – BUY - A$10.00 price target
Mincor Resources (ASX: MCR) - HOLD - A$3.50 price target
Western Areas (ASX: WSA) - HOLD - A$9.00 price target
Independence Group (ASX: IGO) - HOLD - A$4.50 price target
Minara Resources (ASX: MRE) - SELL - A$2.50 price target

Research analyst Paul Young said, “The nickel sector has weathered a turbulent 12 months of volatile price movements, including a record high price in May 2007 which prompted major global stainless steel producers to opt for lower nickel grade stainless steels. Together with a reduction in stainless steel production due to lower demand, this has resulted in a gradual decline in the nickel price.

“We see a potential rebound in the nickel price in the fourth quarter of 2008 driven by an expected increase in stainless steel demand, however, the upcoming reporting season and company-specific news flow are likely to dictate stock movements in the near term.”

On top of a poor 12 months for the nickel price, Deutsche Bank has found that costs across the industry have increased considerably, which combined with a strong Australian dollar, are squeezing margins across the entire sector.

Young said, “We see key macro risks to the sector as movements in nickel, copper, gold and the Australian dollar, while prices could be affected by weaker than expected demand for stainless steel and higher than expected increases in chrome and manganese.”

Deutsche Bank believes upside risks to forecasts include the potential for a higher industry cost-curve to lift commodity prices going forward.

For further information, please contact:

Camilla Anderson (02) 8258 2731
Kate Abrahams (02) 8258 2416