Tuesday, October 19, 2010

TNR Gold: Los Azules: New benchmark for valuation: First Quantum to buy Antares Minerals for C$460 mln TNR.v, MAI.to, CUU.v, SGC.v, NGQ.v, ANT.v, FCX, RTP, BHP, RIO, BVN, AUY, TCK, BWR.to, CS.to, IMN.to, NCU.to, TKO.to, WRN.to

"We are wholeheartedly agree with CIBC: Be Long What China's Short. M&A will drive this sector activity and we have just a few quality juniors with large copper deposits to go after. In this report, we found particularly very interesting the different valuations in the takeover scenarios, presented overall picture of Supply and Demand and qualities, which Chinese buyers are seeking in the potential partners.

Los Azules emerges in this light as a very important Copper deposit with a lot of upside in its valuation among the leaders in this particular quality, relatively high CAPEX requirements, but in the solid middle or to the higher band in a lot of different investment metrics compare to the other juniors in the analysis provided by CIBC."

It is very important that, according to CIBC report page 42, legal claims of TNR Gold are communicated properly within the industry now. Junior can fully rely on its litigation strategy, court decision or potential out-of-the-court settlement, should Minera Andes decide to clean the house before calling the real estate agents.
We will always leave it to the lawyers and court to decide - who owns what in this case in its proper time.
Copper is going up and the deposit is growing - we guess that nobody is in a hurry here. Argentina will become more fluent in Mandarin and the value of every lb of Copper in the ground will go up - to reflect fundamental picture described in the CIBC report."

The first company is gone from CIBC M&A list - who will be next? First Quantum buys Antares Minerals for 460 mil and provides a new benchmark for valuation of other copper projects. As you remember, we like from CIBC list Copper Fox Metals, NGeX resources and Los Azules project, particularly, where Minera Andes is an operator and TNR Gold is claiming its "back-in right in certain parts of the properties" according to ongoing litigation.

We will refer you to:

Minera Andes presentation

Antares Minerals presentation

and will compare valuations of Rob McEwen for Los Azules and actual buy out valuation for Haquira copper deposit in Peru - the main asset of Antares Minerals.

From Antares Minerals:

                                           Los Azules        Haquira

Cu Eq Resource (B lbs)                14              13
Mine Life (Yrs)                             24              20
Annual Cu Production (MM lbs)  375            425
Cu Grade (%)                             0.55%        0.55%
Development Capex (US$ B)       2.7             2.1
Development Capex / Ann. Prod $7.33      $4.85

Valuation by Antarex in September of Haquira was 400 mil (Cu 3.0 USD/lb - 1%) - bought out at 460 mil in October with premium of 15%

Valuation of Los Azules as per Antares metrix: 14 * 3.00 *1%=420 mil with premium 15% buy out should be at 483 mil.

Rob McEwen's valuation of Los Azules at 375 mil is not so stretched after all, keeping in mind the upcoming exploration season on this property.

We do not see the room in illiquid TNR Gold market for outright hostile takeover offer suggested by some blogs following the unusual pattern in the recent trading of TNR Gold, but it will be interesting to see what kind of premium any potential bid could bring if the friendly one in case of Antares was at 41%.

  Above is the Los Azules deposit map with Xstrata property above grid line 65559000, this property is subject to TNR Gold back-in right of 25% according to Statement of Defence by TNR Gold below. Below is map of Los Azules ore body presented by Minera Andes - the largest part of the mineralisation and high grade core is above grid line 6559000 on the Xstrata property, which is subject to litigation between Minera Andes and TNR Gold now.

We expect that the parties will be engaged soon in out-of-the-court settlement and cleared titled will allow Minera Andes to appreciate further reflecting its fundamental value - recent Canaccord note suggested a target price of 3.15 CAD compared even to Rob McEwem 2.83 CASD valuation at 750 mil market cap.

"We hope that fair settlement with TNR Gold will confirm Rob McEwen's "shareholder friendly" status and this deal will allow Minera Andes to enjoy the proper valuation of its assets.
It is important to note, that not a lot of people are reading documents these days: according to the Statement of Defence by TNR Gold, company claims that it has the back in right into the Northern Half of Los Azules (not all deposit) of 25%, which could represent more than 12.5% of total deposit as a "metal in the ground" - with the bigger part of high grade core on its claimed grounds. Every lawsuit has an inherited legal risks for all parties, please read Minera Andes latest MD&A and TNR Gold Statement of Defence NR legal disclaimer - but it is exactly why we think that Robert McEwen is not going to "focus his interests on the companies he runs, U.S. Gold Corporation and Minera Andes." and just sit in the courts with other companies and he will be able to resolve the situation in out-of-the-court settlement and move forward using this unique opportunity."

Please, do not forget, that we own stocks we are writing about and have position in these companies. We are not providing any investment advise on this blog and there is no solicitation to buy or sell any particular company here. Always consult with your qualified financial adviser before making any investment decisions.


Mon Oct 18, 2010 1:57pm EDT

* Antares owns major undeveloped copper deposit in Peru
* First Quantum looks to cooperate with Xstrata on project

* First Quantum shrs down slightly at C$82.60

* Antares up 45.88 pct at C$6.55 (Adds details, share prices, First Quantum comment. In U.S dollars unless noted)

By Julie Crust and Julie Gordon

LONDON/TORONTO, Oct 18 (Reuters) - First Quantum Minerals (FM.TO) plans to buy Antares Minerals (ANM.V), owner of a major undeveloped copper deposit in Peru, moving into Latin America at a time when license issues have halted its operations in the Democratic Republic of Congo.

First Quantum said it agreed to buy Antares in a cash and share deal worth about C$460 million ($456 million). Both First Quantum and Antares are headquartered in Canada.

Antares' main asset is the wholly owned Haquira project in southern Peru adjacent to Xstrata's (XTA.L) Las Bambas copper-gold project. Haquira contains an estimated 3.7 million tonnes of copper on a measured and indicated basis.

The deal values each share of Antares at C$6.35, a 41 percent premium over its closing price of C$4.49 on Friday on the TSX Venture Exchange."

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