Investors don’t like surprises, which is why the share price of Panoramic Resources fell by 25 per cent early last month when it was forced into an emergency capital raising after hitting problems with the redevelopment of its Savannah nickel mine in WA.

The call for an extra $21 million came after slower-than-expected underground mining rates caused by a shortage of skilled workers and delays in commissioning equipment with the net result being a share price fall from 49c to 37c.

Panoramic management, as well as a number of stockbrokers, had red faces after the embarrassing admission that what was expected to be a relatively simple job of restarting a mine, which had worked successfully for a number of years, was not as easy as it looked.

Cautious investors are unlikely to make a quick return to a stock which had been talked up as a potential winner from the new-found interest in nickel and cobalt as key metals in the electric car revolution, with the Savannah orebody a source of both.

Morgans, in a pre-Christmas note reported by Stockhead, forecast a doubling in Panoramic’s price which was trading back then at 35c with 70c the target.


At the risk of saying this time it will be different, there are indications that Panoramic is overcoming operational problems at Savannah, aided by the extra capital and cash from the early sale of nickel and cobalt concentrate.

An update on site works from Panoramic last week caused a flurry of optimism on the market with the stock adding a brisk 3c (7.7 per cent) to trade as high as 42c, before easing back to around 40c.

The Panoramic Resources (ASX: PAN) price over the past six months.

At that latest price Panoramic might not seem to have made much progress on where it was before Christmas. That’s not quite the case though, because there are extra shares on issue from last month’s capital raising while the share price, importantly, is above the 38c price at which the new capital was raised.

Last week’s operations update was given a lukewarm reception by the market, perhaps because there is some truth in the old saying about once bitten, twice shy.

The two-market metal

Understandable as it might be for investors to be wary of Panoramic after it failed to deliver at its first attempt to resurrect Savannah, there are a number of redeeming features that are worth considering.

The first is that nickel remains an attractive commodity thanks its development as a two-market metal with stainless steel, the long-term primary market, likely to benefit from an improving Chinese manufacturing sector, and a fast-growing new market as a battery metal.

Since Christmas the nickel price has risen by 25%, briefly breaching the $US6 per pound mark and seemingly on its way to $US8/lb over the next few years.

Somewhat ironically Panoramic and nickel have both moved by 25 per cent since late last year, one up and one down by that percentage.

The second redeeming feature is the Panoramic is a serious mining company. Small, admittedly, with a stock-market value of a little over $200 million, but with a high-class management team led by the seasoned Peter Harold who will be working day-and-night to make good the botched restart.

A third reason is that Panoramic still has its believers among the broking community and while Morgans is yet to refresh its December 13 buy tip and 70c price target, Macquarie has maintained the faith, albeit with a trimming of its price tip.

From a 70c price target before the Savannah rebuild hit problems and a call went out for more capital, Macquarie now sees 60c as the target, and if that’s right Panoramic could yet deliver a 50 per cent return on investment.

The key word in that optimistic assessment is the smallest – “if”.

A lot obviously depends on the price obtained for nickel and cobalt, along with receipt of the fresh capital and cash from shipments.

Macquarie told clients that the issues which caused the need for a cash injection seem to be improving.

“The company is on its way to hitting its production targets, which are now marginally ahead of our forecasts,” the bank said.

“Panoramic has executed a number of initiatives to improve ramp-up of the Savannah nickel mine.

“These include improving equipment availability, recruitment of additional technical and management staff, review of the mining schedule and filling the vacant permanent roles in the workforce.

“These measures have been showing result with development rates, mining rate, tonnes milled and recoveries (of metal) all improving in March compared with February.”

For investors with a forgiving inclination it’s worth remembering that Panoramic is a company which can fly high when there’s a stiff nickel-wind at its back, as was seen the last time metal prices boomed in 2008 and the stock traded up to $5.80.

That sky-high price of 11 years ago will not return soon, if ever, but it is a milestone in the story of nickel, a metal which can soar spectacularly if demand is strong.

And with electric cars needing nickel for their batteries there is now a second market for nickel – which could be enough the provide Panoramic with a second wind.