Corcel is best known for its vast PNG nickel laterite Mambare Project, once valued at £40m. Management positioned the company to benefit from structural increases in battery metal prices, in particular through a doubling of its nickel/cobalt resource size through the discounted acquisition of the Wowo Gap project. Investors are now witnessing the continued development of a highly relevant vehicle supported by all-time highs and massive disruptions in the nickel market. Additional moves have been made into potential cash generating peaker plants & energy storage via the Flexible Grid Solutions business unit. Also, the Chairman has converted his recently acquired debt to equity at 1.5p and agreed to an 18-month lock-in period.
Heavily leveraged to the ongoing turmoil in global nickel markets
The transition to a low carbon world needs grid level storage and support for renewables to be a viable and stable source of energy. Investors have been clamouring for exposure to batteries & battery metals where a supply crunch had been expected in the mid-2020s onwards with accompanying big structural price hikes. These structural price hikes appear to have arrived early due largely to the Russia-Ukraine conflict and questions around the security and reliability of nickel supplies from Russia - a major producer.
Mambare & Wowo Gap shaping up to be DSO nickel suppliers to China
A Mining Lease for Mambare could be awarded at any time, allowing a DSO operation to proceed at the project. Great synergies also exist with Wowo Gap, the company’s second nickel asset. This all suggests that Corcel is positioned to become a major nickel-cobalt player in the region. An MoU, whilst nonbinding, has been signed with a heavyweight offtake partner & perhaps will assist (alongside recent nickel prices) financing the move into DSO production.
Big opportunities as the UK switches to flexible power generation
Corcel is investing in energy storage/renewable projects to provide critical services to the UK grid as it transitions from coal, nuclear and fossil fuels to renewables. Already, the team has 165MW of well-advanced projects, and a major pipeline of projects which could result in 4 or 5 projects being developed annually.
Peer comparisons & industry metrics suggest c.700% upside
Our highly conservative valuation begins to show the potential of this company. We updated coverage of Corcel with a target price of 10.92p and a Conviction Buy stance.
RISK WARNING & DISCLAIMER
Corcel is a research client of Align Research. Align Research is a major shareholder in Corcel. Full details of our Company & Personal Account Dealing Policy can be found on our website http://www.alignresearch.co.uk/legal/
For full disclaimer information please refer to the last page of the full document. This investment may not be suitable for your personal circumstances. If you are in any doubt as to its suitability you should seek professional advice. This note does not constitute advice and your capital is at risk. This is a marketing communication and cannot be considered independent research.
|Year to June||2020A||2021A||2022E||2023E|
|Pre tax (£'000)||(1,482)||(1,227)||600||2,600|