In the news: Weatherly International
FROM THE BROKING DESK
Weatherly International*† came out with its quarterly numbers yesterday, so Jim Taylor released Weatherly International — Quarterly Production, 26 January 2017. The company noticeably settled down again operationally in 2QFY17. When the bulk of forward sales are completed by mid-2017, the stock will again offer a very high degree of gearing to the copper price on account of its operational and financial leverage. As the company has noted, it is reliant on the continued goodwill of its lender, Orion, which has hitherto demonstrated its support for the company through the multiple rescheduling of debt repayments.
We maintained our SPECULATIVE BUY rating, and have increased our target price from 1.2p to 1.3p. Our revised target price reflects a relatively conservative copper price deck running at US$5,700/t through CY17, then ramping up to US$6,000/t from CY20 onwards. Based on these pricing assumptions, we derive an NPV10 for Tschudi of US$131m. We value Central Operations at US$0, recognising that the NPV of the minor ongoing care and maintenance costs would be more than offset by any real option value. The NPV10 of G&A of US$-14m and net debt of US$100m represent a combined 87% of the NPV10 of Tschudi.
Our target NAV of US$17m, or 1.3p/share, is highly sensitive to changes in project or commodity assumptions. A 5% increase in the long-term copper price would result in a 14% increase in Enterprise Value and a 92% increase in equity value.