Tuesday, 26 February 2013

Stonecap analyst says Copperwood permits “clear the path” for Orvana Minerals to create value

Stonecap Securities analyst Christos Doulis reiterated his “outperform” rating and $2.10 price target for Orvana Minerals (TSE:ORV) Tuesday, a day after the company received the final permits required for its proposed Copperwood copper project.
Toronto-based Orvana on Monday announced that it has been granted its key Wetlands permit for the Copperwood project it is developing in Michigan, U.S., moving one step closer to advancing the copper property into production. 
Over the last year, the gold and copper producer has been applying for permits that will allow for mining this copper deposit. 
The company reported in a statement on Monday that the Michigan Department of Environmental Quality granted the Wetlands Part 303 and the Inlands Lakes and Streams Part 301 permits for the proposed Copperwood copper mine. 
“We believe that having all the major permits in hand significantly de-risks the project and was a critical component for Orvana to be able to successfully monetize or find a partner for Copperwood,” Doulis noted in a Morning Research report.
“With an estimated pre-production capex of $213 million, Orvana does not currently have the financial resources to build the project on its own.”
Stonecap noted that it estimates that the project has an after-tax, net present value of about $148 million and makes up 38 per cent of the firm’s operating net asset value for Orvana.
“We re-iterate our belief that while short-term working capital issues are still a concern, Orvana’s operating assets are now performing well, and this, coupled with the de-risking of Copperwood, leads us to believe that the current share price is an attractive entry point,” said Doulis.
“We believe a deal involving Copperwood could add substantial value for Orvana’s shareholders.”
Earlier this month, Stonecap changed its copper price forecast to $3.50 per pound for this year from $3.25 previously, while it now foresees a price of $3.50 for 2014, compared to $3.00 per pound originally. 
This compares with consensus estimates for copper prices of $3.68 a pound in 2013 and $3.50 a pound in 2014, according to Bloomberg. 
Doulis said at the time that that the copper forecast is largely in line with consensus and raised his rating and target price for Orvana, noting that the company “benefits significantly” from the increase in the firm’s copper price forecasts.
The $2.10 target price was raised sharply from $1.50 previously, based on what Stonecap believes to be “an executed turnaround” at both the company's flagship El Valle-Boinas/Carles (EVBC) gold-copper mine in northern Spain and Don Mario Mine in Bolivia, processing its copper-gold-silver Upper Mineralized Zone (UMZ) deposit.

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