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Archer-Daniels-Midland Co V.ADM


Primary Symbol: ADM

Archer-Daniels-Midland Company is a human and animal nutrition company. The Company is an agricultural supply chain manager and processor. It operates through three business segments: Ag Services and Oilseeds, Carbohydrate Solutions, and Nutrition. The Ag Services and Oilseeds segment includes global activities related to the origination, merchandising, transportation, and storage of agricultural raw materials, and the crushing and further processing of oilseeds such as soybeans and soft seeds into vegetable oils and protein meals. The Carbohydrate Solutions segment is engaged in corn and wheat wet and dry milling and other activities. The Nutrition segment is engaged in the manufacturing, sale, and distribution of a range of ingredients and solutions, including plant-based proteins, natural flavors, flavor systems, natural colors, emulsifiers, soluble fiber, polyols, hydrocolloids, probiotics, prebiotics, enzymes, botanical extracts, and other specialty food and feed ingredients.


NYSE:ADM - Post by User

Post by veteran98on Sep 20, 2010 11:05am
572 Views
Post# 17468515

Canaccord increase target to $2.40

Canaccord increase target to $2.40

Precious Metals Weekly | 6
20 September 2010

Andina Minerals (ADM):

Our 12-month target price has increased to
C$2.40 (from C$2.00) based on 1.0x (previously 0.75x) our 12.5%/diluted peak NAVPS
estimate of US$2.36 (previously US$2.50) translated assuming US$/C$ parity (previously
US
.95/C$).

 

 Good progress at Volcan; further de-risking on the horizon
In advance of a pre-feasibility study expected in Q1/11, Andina Minerals has announced
an improved resource estimate and refinements to the previously contemplated
Conceptual Development Plan for the Volcan Gold Project in Chile.

Highlights include:

• An updated resource estimate for Volcan that includes 8.182 Moz Au grading 0.71
g/t in the Measured and Indicated category (using $950/oz Au) vs. the previous
estimate of 9.773 Moz grading 0.62 g/t (using $850/oz Au). The updated resource
estimate is an improvement over the previous estimate given the 14.5%
improvement in grades, although the overall ounces in the measured and indicated
category have declined by 16.3% due to some of the lower-grade ounces failing to
meet the higher cut-off grade.

• An Initial Phase I Development Plan is being further evaluated by Andina based on
a subset of the overall M&I resource (70-80% of contained ounces) contained within
an intermediate pit shell containing M&I resources of 6.051 Moz grading 0.72 g/t.
The conceptual plan is based on a combined heap leach and milling scenario
involving the processing of higher-grade ore (1.720 Moz Au grading 1.485 g/t)
through a 9,000-13,000 tpd mill and heap leaching of lower-grade material (4.331
Moz grading 0.597 g/t). This compares with the previous base heap leach only
scenario involving an estimated mineable resource of approximately 5.8 Moz
grading 0.69 g/t. Our revised profile now assumes an overall mineable resource of
5.9 Moz grading 0.70 g/t for Phase I (mill – 1.677 Moz grading 1.45 g/t, heap leach
– 4.223 Moz grading 0.58 g/t).

• For Phase 1 the company is targeting a 50,000-60,000 tpd combined heap leach
and milling operation (9,000-13,000 tpd mill) compared with the previous 60,000
tpd heap leach only operations. We now assume a combined 55,000 tpd heap leach
and milling operation including an 11,000 tpd mill and a 44,000 tpd heap leach
operation.

• Mill recoveries are estimated at 60-83% and heap leach recoveries at 45-69%, with
overall blended recoveries (mill and heap leach combined) under the scenario
expected to improve to 60-70%. This compares favourably with the previous base case
heap leach only scenario which highlighted lower overall recoveries of 57-60%, based
on a realistic 6 mm crush size. Our revised profile assumes mill recoveries of 76% and
heap leach recoveries of 63% for blended average heap leach and mill recoveries of
65%.

• While capital cost estimates have not been provided, we have increased our
assumed initial capex to $650 million from $510 million. We have also increased
our sustaining capital assumptions to a more realistic $8 million per year ($107
million over the life of the mine) from our previous estimate of $2 million per year
($22 million over the life of the mine).

• Average annual production is estimated at 260,000-330,000 oz over a 12- to 14-
year mine life. Our modelled profile assumes a heap leach operation producing an
average of 180,000 oz/year over a 14-year mine life and a mill operation producing
approximately 141,000 oz over nine years, for combined average annual production
of 269,000oz over 14 years.

Valuation

While the improved grades have a positive impact on our 12.5%/diluted peak NAVPS
estimate, this is largely offset by higher assumed capital costs. However, we note that
our revised profile is calibrated to the Phase I Development Plan and includes only a
subset of the overall resource (5.9 Moz). There is upside potential to our valuation on
potentially incorporating the entire M&I resource of 8.2 Moz, after Phase I has been derisked
(at a 10% or lower discount rate). Our 12-month target price has increased to
C$2.40 (from C$2.00) based on 1.0x (previously 0.75x) our 12.5%/diluted peak NAVPS
estimate of US$2.36 (previously US$2.50) translated assuming US$/C$ parity (previously
US
.95/C$).

Upcoming catalysts

Volcan project pre-feasibility study (Q1/11)

Investment risks

The typical risks associated with any mining investment include commodity and
exchange rate risk, and permitting and technical (development/operating) risk. In
particular, investors considering an investment in Andina Minerals should consider the
early stage of the Volcan project, which is still at the resource definition stage

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