Yesterday, some headlines suggested that Lundin Mining missed estimate with its reported Q3 numbers - we are not following it yet at the depth sufficient to give here any comments on existing estimations. Earnings reported are mixed with different one time charges and we will need to dig it deeper in order to understand how financials will be effected in the short term by the announced reduced outlook for production for 2010. Nothing so far changed our own valuation and the big picture outlook.
We are here to talk about the big picture and where this company is positioned in it. It is the play on Tenke Fungurume growth with its Cobalt and Copper production. If you believe in Friedland's future - it is about next 30 years when "phenomeon" of electric cars will drive the demand in Green metal and Lithium. Lundin Mining at these levels will be a potential target for acquisition for the slice of Tenke Fungurume. Freeport McMoran will be the natural suitor and should bid, in our view, at least for the Tenke Fungurume stake - if not for the all company. Another combination from FCX and LUN will be to announce further expansion in production and sell all this story to the Chinese interests, who are positioned very strongly in the DRC.
Financial Times picked up the most important for the Lundin Mining future, which market will have yet to reflect in its valuation. "Perception of risk surrounding the Tenke licence increased in August when Canada's First Quantum Minerals was stripped of the last assets in Congo." Market knew about this situation before and Lundin Mining was sold into the ground to below 3.0CAD during last summer.
Now, with Tenke Fungurume in full play Lundin Mining will be an easy target below 6.0CAD. Financials will drag the company for a while on the operational side, but Tenke's potential will be the blue sky here. New discovery in Europe will help to the whole picture of resources controlled by this company. The company is highly leveraged to Copper and Zinc prices as well.
The most interesting will be to see how Lukas Lundin will use this opportunity and address its own growth prospects. Company has 300 mil credit line and can use its own currency for further acquisitions. On the technical side company has made a break out of Cup and Handle pattern to the upside, these days stock is testing the break out level at CAD6.0 and provide an entry point according to our logic. We will monitor the new research notes coming out - to address the full potential of Tenke Fungurume for the company.
Lundin Mining Q3 presentation
"We believe that Lukas Lundin will have to make his move and show that now - with cash flow from Tenke Fungurume and further expansion of production in DRC - he can build value in Lundin Mining itself. Realisation of the facts, described above, by the market could bring the share price north of CAD10.0 (we will not be surprised to see a target price of this magnitude with company's book value at around CAD5.2 now and E/P at CAD 0.13 in Q2 2010). Lukas will be again in a very favorable position after these very tough few years for the company. He can and should use his currency - shares in the company above CAD10.0 to buy another companies with sizable projects at still undervalued valuations among juniors. He should definitely, in our opinion, to study well opportunities for acquisition in CIBC report. His another company - NGeX Resources is a part of that M&A list with its properties in Argentina, Chile, Africa and Canada is moving up nicely in price these days as well. TNR Gold has a few J/V projects with NGeX Resources in Argentina. Lukas Lundin was buying recently NGeX Resources in the market.
We won't speculate about Lundin Mining involvement, potentially, in Los Azules story, but will point to the few facts, which are keeping us guessing about the future move. Lukas was personally involved in TNR Gold as an investor at one point, knows management there very well and Paul Conibear - Senior Vice president of Lundin Mining corporate development - served on the Board of TNR Gold for a few years. By the way - Tenke Fungurume is his baby - we would like to congratulate Paul and all team at Lunidin Mining with this ground breaking achievement for the company. Lukas was investing in Minera Andes before as well, at least before Rob McEwen came into the picture. We do not know, what stake he has now, but he knows the story about Los Azules very well. Rob is more of a gold guy and Lukas knows the basic metals commodity story very well, particularly copper. Will it make sense for Rob to sell Los Azules to Lukas Lundin at the right price after settlement with TNR Gold and clearing the property title? We do not know at this moment, but any twist in this direction can bring a new dynamic to the all situation regarding Los Azules and its development. It is too early to say more about it at this moment."
Financial Times picked up the most important for the Lundin Mining future, which market will have yet to reflect in its valuation. "Perception of risk surrounding the Tenke licence increased in August when Canada's First Quantum Minerals was stripped of the last assets in Congo." Market knew about this situation before and Lundin Mining was sold into the ground to below 3.0CAD during last summer.
Now, with Tenke Fungurume in full play Lundin Mining will be an easy target below 6.0CAD. Financials will drag the company for a while on the operational side, but Tenke's potential will be the blue sky here. New discovery in Europe will help to the whole picture of resources controlled by this company. The company is highly leveraged to Copper and Zinc prices as well.
The most interesting will be to see how Lukas Lundin will use this opportunity and address its own growth prospects. Company has 300 mil credit line and can use its own currency for further acquisitions. On the technical side company has made a break out of Cup and Handle pattern to the upside, these days stock is testing the break out level at CAD6.0 and provide an entry point according to our logic. We will monitor the new research notes coming out - to address the full potential of Tenke Fungurume for the company.
Lundin Mining Q3 presentation
"We believe that Lukas Lundin will have to make his move and show that now - with cash flow from Tenke Fungurume and further expansion of production in DRC - he can build value in Lundin Mining itself. Realisation of the facts, described above, by the market could bring the share price north of CAD10.0 (we will not be surprised to see a target price of this magnitude with company's book value at around CAD5.2 now and E/P at CAD 0.13 in Q2 2010). Lukas will be again in a very favorable position after these very tough few years for the company. He can and should use his currency - shares in the company above CAD10.0 to buy another companies with sizable projects at still undervalued valuations among juniors. He should definitely, in our opinion, to study well opportunities for acquisition in CIBC report. His another company - NGeX Resources is a part of that M&A list with its properties in Argentina, Chile, Africa and Canada is moving up nicely in price these days as well. TNR Gold has a few J/V projects with NGeX Resources in Argentina. Lukas Lundin was buying recently NGeX Resources in the market.
We won't speculate about Lundin Mining involvement, potentially, in Los Azules story, but will point to the few facts, which are keeping us guessing about the future move. Lukas was personally involved in TNR Gold as an investor at one point, knows management there very well and Paul Conibear - Senior Vice president of Lundin Mining corporate development - served on the Board of TNR Gold for a few years. By the way - Tenke Fungurume is his baby - we would like to congratulate Paul and all team at Lunidin Mining with this ground breaking achievement for the company. Lukas was investing in Minera Andes before as well, at least before Rob McEwen came into the picture. We do not know, what stake he has now, but he knows the story about Los Azules very well. Rob is more of a gold guy and Lukas knows the basic metals commodity story very well, particularly copper. Will it make sense for Rob to sell Los Azules to Lukas Lundin at the right price after settlement with TNR Gold and clearing the property title? We do not know at this moment, but any twist in this direction can bring a new dynamic to the all situation regarding Los Azules and its development. It is too early to say more about it at this moment."
No comments:
Post a Comment