"out of takeout territory" ?Osisko Mining Corp. (OSK.TO) is down 2% as Credit Suissedowngraded it to Neutral from Outperform, lowered its earningsestimates but raised its Target Price to $15.75 from $15.50 becauseits recent share price gains may have priced it "out of takeoutterritory."
"A premium asset has received premium performance. Osisko'sshare price has risen 37% over the past 30 days while theintermediate peer group is up 16%. With construction progressingsmoothly and production targeted to begin in Q2/11, a strongbalance sheet, expected low cash costs of under $400/oz, promisingexploration results at Hammond Reef adding value to that project,and speculation over M&A, the recent share price performance isnot surprising," Credit Suisse said in a morning note.
"Is Osisko still at takeout candidate? Despite the spectacularshare price performance, we continue to believe that Osisko shouldstill be considered a potential takeout candidate. However, we areincreasingly of the view that additional share price appreciationin excess of its peers reduces the likelihood of Osisko gettingacquired, or would at least reduce any premium that would beexpected. If exploration is successful in adding more ounces,Osisko's relative value on an EV/oz basis could again become morecompelling."
"Aside from our expectation for exploration news flow on HammondReef to deliver incremental value over the coming months, anofficial commencement of production at Malartic in Q2/11 will bethe main catalyst we anticipate will re-rate the company as itfirmly becomes as producer of gold.
"To more accurately take into account the risks associated witheach of Osisko's assets, we now value Osisko's flagship CanadianMalartic project to 1.1x NAV, the exploration and development stageHammond Reef project at 0.7x NAV, and add the cash and othercorporate adjustments to our NAV at 1.0x NAV. As a result, ourP/NAV target multiple has increased to 1.05x, from 1.0x previously,and our target price has increased to C$15.75, from C$15.50previously. Based on the recent share price appreciation, we havedowngraded Osisko to Neutral from Outperform. Our EPS estimates for2010/11/12 have changed slightly to (C
.08)/C
.44/C$1.19 from(C
.07)/C
.46/C$1.25 as we incorporated an updated sharecount."