Lumina Copper Corp LCPRF

Canaccord initiates Buy Coverage-It's looking Good

[Helios]

Taca Taca cuts to the front of the line

Lumina Copper is under the stewardship of the management team, originally led by Ross Beaty, and including David Strang, Marshal Koval, Leo Hathaway, and Robert Pirooz, and who have successfully divested five companies (valued in excess of
US$1.4 billion) with base metal assets over the last five years. Lumina’s principal asset is a 100% interest in the Taca Taca Cu, Au, Mo property in Argentina.

In November 2011, LCC released an updated mineral resource at Taca Taca. This new resource indicates expanded Cu, Au, Mo mineralization and improved confidence over the previous resource. Cu only resources (all categories) are 14.9 billion lbs Cu (18.7 billion lbs CuEq), up from 8.7 billion lbs Cu estimated from previous work. Lumina is one of a few junior mining companies that control a significant copper porphyry system of this scope.

Lumina has conducted initial engineering studies and preliminary metallurgical studies that have outlined what we believe are reasonable insights into the development of a large scale open pit copper mining operation at Taca Taca. Based on industry demand for copper porphyry deposits, and what we believe is a fundamental shift to higher acquisition prices being paid for quality deposits, we expect that Lumina could be subject to a takeover bid that values the company in excess of US$900 million.

Valuation

Using our long-term copper price of US$2.50/lb, we estimate that the Taca Taca project could command an after-tax NPV 10% of approximately US$1,451 million
(US$2,154 million using 8%). If we apply a target 0.55x NPV discount (to account for the project’s early stage of development), we generate a NAV of C$914 million assuming a C$1.00/US$1.00 exchange rate, and a C$19.78 per share target.

We are initiating coverage of Lumina Copper Corp. with a SPECULATIVE BUY rating and a 12-month target price of C$19.80 per share (rounded).