Nevada Copper Corp NEVDQ

Scotiabank: Sector Outperform rating & $3.70 target for NCU

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According to Scotiabank:
 
Monday, August 17, 2015
 
Nevada Copper Corp.
 
(NCU-T C$1.14)
 
All Permits in Hand; Awaiting Project Financing
 
Rating: Sector Outperform
 
Target 1-Yr: C$3.70
 
ROR 1-Yr: 224.6%
 
Risk Ranking: Speculative
 
Valuation: 0.6x Mine Site NAV + 1.0x Net Cash
 
Key Risks to Target: Commodity price, permitting, construction, operating, and technical risks, environmental and legal risks
 
Event
 
- NCU's wholly owned Pumpkin Hollow project is now fully permitted for the 70,000 tpd integrated open pit and underground operation.
 
Implications
 
- The appeal period for the revised reclamation permit expired early last week with no appeals filed, making the permit effective as of August 14. The revised reclamation permit was the last outstanding permit required for construction and operation pending finalization of the congressionally mandated land transfer.
 
- NCU continues to assess project financing alternatives with respect to both the integrated option and the fully permitted Stage 1 underground. The intent is to conclude determination of the optimal development strategy following conclusion of the land transfer process expected this month (August). Regardless of the option NCU chooses, significant funding will be required. In the context of the current capital market environment we believe it will be difficult to finance either option at this time.
 
- In our view, it is likely that NCU will use its current cash ($9.8M at the end of Q2/15) to continue lateral underground development and exploration in 2015, which does not preclude either development option, while awaiting project financing conditions to improve.
 
Recommendation
 
- SO rated with a fully-diluted fully financed target price of C$3.70. Target price based on 0.6x mine site P/NAV8%, plus 1.0x net cash items.