logo-loader

Fox-Davies starts coverage of Copper Development Corp

Last updated: 13:02 15 Dec 2010 GMT, First published: 14:02 15 Dec 2010 GMT

no_picture_pai

Fox-Davies Capital has initiated coverage of Copper Development Corp (LON:CDC) with a ‘buy’  recommendation and a target price of 73 pence per share.

The group listed on AIM this week. Fox-Davies placed 116.18 million new shares 35 pence a share, which raised £40.7 million before expenses, or approximately US$65 million, thus capitalising CDC at £78.7 million.  The stock was trading at 36.25p in early afternoon deals today.

CDC's principal asset is its 92.5 percent interest in the Sipalay-Hinoba-an copper project (Hinoba-an) located on the island of Negros in the Philippines, approximately 700 kilometres south of Manila.  The Hinoba-an project is ideally located to serve the growing Chinese copper market, the world's largest user and importer of refined copper, CDC said on admission.

A significant amount of exploration and metallurgical testwork has been conducted on the property including diamond, reverse circulation and geotechnical drilling of 473 drill holes over 90,322 metres, which has defined two porphyry copper deposits, the Don Jose (DJ) deposit and the A1 deposit.

The Hinoba-an project has a JORC compliant gross mineral resource of 173 million tonnes at 0.42 percent copper at a 0.3 percent Cu cut-off grade, containing approximately 1.6 billion pounds of in situ copper.

Overall, the broker values the project today at US$219.4 million. This was derived using a net present value approach, with the start-up of the mine less than four years away, and the 15 million tonnes per annum case. Consequently, the passage of time should see this valuation increase.

“We believe that it will require this time to complete the necessary feasibility work and build the plant. In our analysis we have allowed 6 months and US$9.1 million for the pre-feasibility study and a further 12 months and US$12.5 million for the bankable feasibility study.”

It further believes there is significant upside to the project based on the facts that the A1 ore body is open at depth; grades are improving at depth, and the potential to sell pyrite. There is also the potential for a high grade starter pit which would enhance early cash flows and by-product credits from pyrite.

For the purpose of this report, Fox-Davies is assuming that the project is entirely funded with debt, with borrowings commencing in the fourth quarter of 2012.

The modelling indicates that, without the benefits of hedging which would raise the copper prices used in the model, the project generates an internal rate of return of 32 percent after tax, it added.

CDC chairman Mitch Alland said after the listing: "We are pleased with the response that we have received from investors during the placing.  The funds raised, together with our team's extensive experience in the region, will enable us to bring the Hinoba-an project into production through an accelerated development programme.

“We believe the current upward trend of copper prices signals a growing supply-demand imbalance in the copper market. The increasing global demand for copper represents a significant opportunity for CDC.  In Asia this growth has been particularly robust, most notably in China which accounts for 37 percent of world refined copper consumption. The board feels CDC is well positioned to deliver increased value to our new and existing shareholders," Alland had added.

Oriole Resources outlines 2023 achievements and future exploration plans

Oriole Resources PLC (AIM:ORR) CEO Tim Livesey and chief financial officer Bob Smeeton join Proactive's Stephen Gunnion with details of the company's 2023 financial and operational performance. Livesey highlighted successful exploration programs in Cameroon, at the Bibemi and Mbe projects,...

2 hours, 53 minutes ago