Scotiabank: Sector Perform rating and $2.00 target for BCMAccording to Scotiabank:
Wednesday, May 14, 2014
Bear Creek Mining Corporation
Rating: Sector Perform
Target 1-Yr: C$2.00
Court Returns Santa Ana Rights Unequivocally
Event
- The Lima First Constitutional Court recognized Bear Creek's title to the Santa Ana property, returned the company's rights, and reaffirmed the project remains in the National Interest.
Implications
- The decision is appealable by the government following the formal notification of the ruling over the next couple of weeks. We consider this a positive development for Bear Creek, but it is not clear if the government anticipated this and how it may react.
- If Bear Creek recommenced work, we believe it would need a few months to complete the ESIA (Environment & Social Impact Assessment), hold public hearings, and sign agreements. We would factor in one year for approval and another for construction, for production in 2017.
- Pending the government's and local responses, we are not changing our valuation, which currently does not ascribe any value for Santa Ana. However, it could have an NPV at an 8% discount rate of $95 million ($1.02/sh) versus our current NAV estimate of $3.99 per share.
- We are pushing Corani out in our model to 2H/17 versus late 2015, resulting in a lower NAV and a new one-year target price of $2.00. With Santa Ana, our target price would be $3.00 per share.
- A conference call is scheduled for 9 am ET at 416-764-8688.
Recommendation
- We maintain our Sector Perform rating pending Peru's response.