12.15
RBC CM Outperform, Above Average Risk, Price Target: $5.80
RBC CM has revised its estimates after incorporating Lundin’s 2010 production and cost guidance released on December 11, 2009. 2010 production is largely unchanged from 2009 with exception of zinc. Total copper production for 2010 is estimated to be 90,000 tonnes versus 91,000 tonnes for 2009. Zinc production is substantially lower at 92,000 tonnes for 2010 versus 100,000 tonnes for 2009 due to the closure of Galmoy in 2009. Nickel production is expected to increase to 7,500 tonnes in 2010 from 7,200 tonnes in 2009, and lead production is unchanged at 40,000 tonnes. 2010 Capex is expected to be around $250 million. Neves Corvo, Zinkgruvan, and Aguablanca should continue to contribute positive cash flows. In addition, Tenke should begin to make a significant contribution to earnings over the next 12 months, and ultimately could transform the company in RBC CM’ view. While Lundin does appear to be relatively fully valued based on near-term earnings and cash flows, RBC CM’ NAV suggests that the market is assigning no value to Tenke.
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