Andrew Racz
Director of Research
300 East 54 Street, Suite 26C
New York, NY 10022
Phone: (212) 319-6949
Fax: (212) 753-1944

Brilliant Mining Corp.

September 17, 2006


Price:  C. $.78



U.S. $.70



Note: The company is listed on Tier 1 on the Toronto Venture Exchange (TSX).

As of June 30, 2006


Long-term debt




Convertible debenture*



Shareholders' equity



*10% coupon


Conversion price: C. $1.00


The future of Brilliant Mining is complex.
It has a bright future of a nickel mining concern,
its financial structure, once simplified, creates unusual

A Vancouver-based company whose main operation is a 25% partnership with a nickel mining entity in Perth, Australia, in fact a public company, in Australia, is in the mining business.

The company was incorporated under the Alberta Business Corporation Act on October 1, 1998 and has its shares listed for trading on the TSX Venture Exchange. In the period ended June 30, 2006, the company acquired all of the issued and outstanding shares of a private Australian company, Donegal Resources Pty. Ltd. Donegal has a 25% interest in the unincorporated Lanfranchi Joint Venture consisting of a producing nickel mine property on an approximately 50km2 geographically continuous mineral tenement package in Western Australia.

Prior to this acquisition, the principal business of the company was the evaluation, acquisition and development of mineral exploration properties. By acquiring Donegal the principal business of the company has changed to the extraction and sale of ore containing nickel.

The company’s nickel production is small in absolute terms but it’s steadily growing as can be projected for the next five years. To put the company in perspective, it has approximately 80,00,000 fully diluted shares outstanding, of which 26,000,000 would mature as tradable shares upon the exercise of various warrants and convertible debt, the table of which is presented below.

Potential Shares Outstanding

June 30         Shares Outstanding


Warrants Outstanding

($.69 Exercise Price)


Convertible Debentures






Based on the previous table, the warrant exercise program and the current cash position is approximately $15 million. Accordingly, the current market cap, which is about C. $70 million, is almost 20% backed by the $15 million cash the company would have upon the exercise of all the warrants and convertible debt.

This purely financial information indicates that there is a possibility on pure financial fundamentals that a company is emerging whose book value and cash value is equal to the market price after about 4 successful years. At the same time it is engaged with a powerful partner in the production of nickel, which is projected to bring about $15-20 million profit in fiscal 2007 and $30 million in fiscal 2009.

The financial aspect of the operating business is also very impressive. Preliminary information from Brilliant’s Australian partner and public sources indicate that the partnership delivered approximately 1,208 tons of nickel in the June quarter, which was actually later higher because the month of July had a delivery of 572 tons of nickel. The following table illustrates the big operating leverage and cash flow. Brilliant has a 25% partnership in that production, the structure of which we illustrate in the table below.

Utilizing the monthly figure of June -- 572 tons -- Brilliant receives one-quarter in gross distribution, minus the smelter fee and hedging cost.

Monthly Delivery based on 6,000 tons of Ni metal per year 

500 tons ore*

   $ 8,580,000

OPEX + milling

   $ (2,750,000)


   $ 5,830,000

BMC 25% Revenue

   $ 1,450,000

BMC 25% Revenue Annualized**

   $ 17,500,000

BMC 25% Post-hedged Revenue

   $ 6,500,000

* 500 Ore tons delivered x 88% recovery x 65% smelting net fee x $30,000/ton Ni price.

** Pre-hedged revenue.

*** Assuming 75% of production hedged at U.S. $6/lb.

*** Current Hedging Arrangement expires at the end of July '07 production month.

However, it is expected that in the September quarter, the figure would be 1,300 and the following March or May, it could grow to 2,000 quarterly deliveries. The calculation at the 2,000 tons of quarterly delivery indicates a potential gross revenue flow of over $60 million.

Quarterly delivery, effective delivery

2,000 tons x 88 x .65 = 1144 ton


$30,000/t     $34.5M

Monthly tonnage revenue

670 tons

Smelter, milling (40%)

12,000,000 - $9.6M

Total revenues for BMC annual cash flow

$25 Million

25% to Brilliant


Annualized to Brilliant


Thus, at the over $30,000,000 per ton level, annual income can be about $2.00 per share.

Going back to the balance sheet of Brilliant, and assuming that the following fiscal year 2008 and 2007 would have a delivery rate of $2,000 a quarter, we can create a possibility that in the balance sheet of Brilliant by the end of fiscal 2008, there will be over $75 million cash and by calendar 2008, in December, the figure will be over $175 million.



Jan. 2007

Jan., 2008

Dec. 2009






If, however, BMC’s 25% interest in the Australian partnership can be sold (net) of taxes for $100M, we are talking of a potential cash value of $155M.

Let us now examine the future of this company, not only in financial but in operating and macro-economic level. The end of the Cold War began the development of the so-called Communist world and China at a rate that none of the political leaders of the last century have ever envisioned. In a way, we could proudly say that the hidden reserves, the determination and the constructive spirit of the six billion people in this universe have defeated the destructive forces of the 20th century.

The main leaders in this crusade are the working people of China, India, Russia, Indonesia, the Middle East and now perhaps beginning the 600 million African Continent. Three billion new capitalists were born in the Far East and they have created their own demand and their own desire to have steel created to transform their society. See Table 8 on International Steel.

This demand is much greater than the demand for the past. In 1941, Prime Minister Winston Churchill reminded the Japanese that the 100 million steel production of the United States, the 12 million steel production of England is greater than the 7 million steel production of Japan and in a war, Japan will be defeated.

Sixty years later, the world steel production, broken down to some countries, is more than twice as big and it's growing. It is not the space to describe the alternatives or non-alternatives of stainless steel. Today 67 of the nickel production companies satisfy the world's stainless steel demand, and that percentage in the next five years is likely to be well over 70%.

Tight steel market strains supplier-customer relations: with prices going up, the lead times stretching out, supplier-customer relationships are being put to the test. In today's tight market, customers have placed a premium on dependability of supply and honest communication regarding availability and delivery.

The Indian steel industry is poised for massive expansion. The combination of strong consumption, growth, high steel prices and a relatively unexploited iron ore raw material base has already attracted massive investment.

The GPMS-MC global steel market price index appears to have peaked. It stood at 167 in August compared to 193 in July, brought down by weaker raw material and slab prices and strip product prices in Asian and emerging markets. However, we are not forecasting a major slide in the short term. It will hold at or just below current levels through to November.

What we would like to state is that the demand for nickel is unlikely to fall. We can't have an economy satisfying the steel demands of Japan, Russia, India and China--and each of them are growing--without delivering nickel. The production of nickel, if it's assured internationally worldwide at a certain level, creates a basis for nickel mining companies, as their products are automatically taken up. In other words, if you take the existing mines and the growing demand, the first issue any economist will point out is that the price is not going to go down but it's going to go up. If the acquisition of nickel by the steel and other industries is an assured factor, obviously more mining will happen.

It is not a coincidence that when investment advisors and bankers suggest a nickel play, they have the following alternatives. 

  1. Inco (N) - NYSE $76

  2. The LME

  3. 3. The LME mini-contract -- which is cash.

Thursday, September 7, 2006

Positive sentiment supports base metals

LONDON, Sept. 6 (Reuters). Lead was at the front of an advance in a solid day's trading at the London Metal Exchange on Wednesday, dealers said.

While most three-month contracts rose around 2%, led was up 4.7% to a peak for the day of $1.345 per ton, its highest since February.

Traders said buyers were picking up contracts across the board, and the new wave of speculative money that fund managers talked about on Tuesday was still coming into base metals.

"It's the whole complex," a ring dealer said. "The reason behind it is there's buying in the Far East, there's fund buying and there's technical buying."

Lead closed kerb trading at $1.340 per ton, up $55 on Tuesday's kerb.

Copper ended the kerb up 1.5% at $8.040.

Very few publications have pointed out of the emerging new industry, mainly publicly owned nickel companies in Australia, Canada, and South America that can provide an investment alternative for people who want to participate in the popularity and prosperity and the future of the nickel industry.

It so happens that when we look at some of these companies like Brilliant Mining of their partner, Sali Mali Mining Ltd. in Perth, Australia, we find that their respective multiple is unusually low for a solid, steady mining entity. Not only do they represent solid values, but oversized current and definitely potential cash value which hardly accompanies an industry in its early stages. To place Brilliant financial in this picture, we have created an evaluation which we present in the following table.

Potential Value of Brilliant Mining

Current price: U.S. $.70


(with interest)


Cash (current)




Calendar 2007 profit




Calendar 2008 & 2009 profit

Value $25M


Value of 25% partnership









+ interest


Looking back on comparative thoughts in the investment field, when an industry suddenly emerges and captures from virtually infinitesimal market valuation, stockholders' attention and creates large oversized capital gains, I want to quote two examples.

   4.  In the middle or late 1990s, Amazon and other Internet companies broke into the limelight. Most of the companies were not rich.

   5.  In the middle of the 1960s, Xerox introduced the Copier 914. It was originally estimated to have an unlimited market. Many times between 1964 and 2006, I have seen in describing companies or industries that maybe a Xerox type phenomenon has broken the stock market and the economy. Some worked, some didn’t.

It is for the intelligence and the researchability of the reader to evaluate the figures and the facts we have provided and answer the question himself: Would this new publicly-owned nickel company represent a Xerox type of phenomenon which could make a major difference in any portfolio?


Information contained herein is based on data obtained from recognized statistical services, issuers reports or communications or other sources believed to be reliable. However, such information has not been verified by us and we do not make any representation to its accuracy or completeness. Any statement non-factual in nature constitutes only current opinions which are subject to change. BERAL INC. or their officers, directors, analysts or employees may have positions in the securities or commodities referred to herein, and may as principal or agent buy and sell such securities or commodities. An employee, analyst, officer or a director of BERAL INC. may serve as a director for companies mentioned in this report. Neither the information nor any comment expressed shall constitute an offer to sell or a solicitation of an offer to buy any securities or commodities mentioned herein. There may be instances when fundamental, technical and competitive opinions may not be in concert. This firm may from time to time perform investment banking or other services for or which investment banking or other businesses from any company mentioned in this report.



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Andrew Racz. 300 East 54 Street, Suite 26C, New York, NY 10022
Phone: (212) 319-6949 Fax: (212) 753-1944. E-mail:

Copyright © 2011 Andrew Racz. All Rights Reserved.