Rio Alto Mining Limited RIOAF

CIBC World Markets

[retiredcf]

Here's their reaction to yesterday's earnings. Price target is 50% higher than current price. GLTA

 

 

Rio Alto Mining Limited

In-line Q1, Betting On Improved Guidance In H2/12

? Rio continues to outperform its peers, up 2% YTD against junior base metal companies that are down 13.14%. Valuations at 0.66x NAV makes the name an attractive target for a gold producer. Currently, senior gold companies are trading at 0.9x NAV on average.

? Q1 Adjusted EPS were
.16 compared to our estimate at
.15 and consensus at
.07. We estimate that the Street must have been conservative regarding cash costs or the Peruvian royalties and taxes. The difference to our estimate was due to lower-than-expected stock expense.

? Production results were 54,947 oz Au at cash costs of $428/oz, although including taxes and overhead costs were $909/oz. The effective tax rate for the quarter totaled 43.8% including Peruvian royalties. We expect cash costs to increase marginally in Q2, though this is grade dependent.

? Management highlighted that production guidance for 2012 may be revised though not until after Q2. This could be a significant catalyst for the stock. Our rating remains Sector Performer and PT remains at $6.00.