This is email from Investors Relations
Hello again!
I thought you might like to see a little write up by an analyst that put things into perspective.
Best regards,
Sophia
Temporary weakness creates fine entry point
We maintain our Buy rating after the operational update, but raise our
target price to SEK 42 (from SEK 40) due to stronger metal prices and
higher peer valuation. With higher volumes from Tenke in 2013,
continuous takeover potential and a potential trigger from a decision to
expand Zinkgruvan, we continue to like the share.
Aguablanca likely to close early – Tenke runs fine
Due to continuous instability in the south pit wall in Aguablanca, there is
restricted access to certain areas and management has assumed mine
closure by 2014, which we have included in our forecast. Furthermore, we
have made slight downgrades to copper production in Zinkgruvan. We
continue to see upside to guided copper production in Neves for 2013 as we
believe the zinc mill circuit will be continuously used for copper
production as long as zinc prices are at depressed levels. Tenke operations
are running fine and we have made some slight upgrades to volume
assumptions. All in all, we downgrade PTP by 1%-3% for 2013E-14E.
Still significant growth in 2013 and 2014
Despite assuming closure of Aguablanca (which is a high-cost nickel/
copper mine and has an immaterial impact on our NAV), we see significant
volume growth going forward. In 2013, we expect copper volumes to be up
12% thanks to Tenke and in 2014 we forecast that zinc volumes will
increase by 16% due to ramp-up in Neves. Also, there is plenty of upside
(around 30%) on 2015E PTP if Zinkgruvan is expanded.
A fine and clean exposure to improving macro
On mark-to-market (MtM) prices, Lundin trades at 5.0x 2013E OPCF. This
is substantially below peers, which trade at roughly 7.5x. With Tenke
ramping up volumes, we believe the perceived risk premium will decrease
from an investor perspective. In addition, with takeover potential and a
possible trigger from a decision to expand Zinkgruvan, we consider the
share to be a clean and fine exposure to improving macro fundamentals.
Our target price corresponds to 6.4x 2013E MtM OPCF.