congo election, page-3

minenews story Minews Story Date: November 07, 2006

Anvil Mining Offers Good Earnings Growth From Copper And Cobalt Plus A Nominal Dividend

By Jack Hammer

Hard to believe that the Democratic Republic of Congo could be turned into such a good news story so quickly. Nevertheless with reasonably straightforward elections in the summer, money pouring in from mining and other interests, and catastrophes in abundance elsewhere in the world, Congo is almost becoming a decent address these days. For those who dislike political risk there’s no doubt that the Congo is still too much of a stretch, but for those who like to follow the money it’s a different story. There’s plenty going into the DRC, much of it directed towards the historically more restful areas in the south on the copper belt and along the border with Zambia.

Representing London, First Quantum, Aim’s largest company has copper interests down there, as does Nikanor, the largest miner to list on Aim this year and Banro Corporation, Moto Goldmines and Copper Resources are also active in the region. And over in Canada there’s Anvil Mining, a company that’s been on the ground in Congo in one shape or form for more than ten years now, and which raised C$149million in a fundraising earlier in the year that was twice oversubscribed and in which 45 institutional investors took shares.

That’s international money, mind, not just Canadian. Following the placing, Anvil’s new dedicated investor relations director, Robert LaValliere has been travelling the world keeping new investors up to date. London money is represented too: “We now start to have a good following in London”, he says on a visit for the Mining Journal’s copper day. UK fund managers know a good thing when they see one, and, with copper at over US$7,000/tonne, a company that has two producing copper mines beats any exploration project hands down at the moment. Anvil’s shares have put on over 30 per cent in the last six months and more than doubled over the year. Nikanor, which isn’t yet producing, has seen its shares come off by more than 20 per cent since listing in July. A copper mine in hand is worth two in the bush, it seems.

Mr LaValliere doesn’t do detailed comparisons, but in praise of his own company he does say: “We’re smaller than Nikanor. Our grades are higher, our capex lower. We’ll make very quick cash flow”. And the company is already generating cash from its two producing projects at Dikulushi and Kulu. Both are indeed smaller than Nikanor’s KOV properties, but in the six months to June the two together produced nearly 20,000 tonnes of copper in concentrate, generating revenues of US$43million and net earnings of US$22.5million. That’s real money on the table, and according to bespoke research from analysts at Canadian house Global Mining Research there should be plenty more to come. Global Mining Research forecasts profits of US$43million this year, and US$63.2million in the year to December 2007, using a US$2.00/lb copper price and US$14/lb for cobalt.

Earlier in the year the assumption was that growth would come from the Kulu property, but according to Mr LaValliere, it “isn’t worth an SXEW plant yet”, so the emphasis has now switched to Kinsevere, the company’s third major project, which is due to come on stream next year. Kinsevere, 30 kilometres north of Lumumbashi, boasts a resource of 348,000 tonnes of copper. Following a feasibility study competed in April Anvil anticipates an initial spend of US$35million on the project for production of between 20,000 and 25,000 tonnes of copper. Plans for a second stage of development, involving an SXEW plant, a near tripling of output, and a further US$65-$75million capex, will be finalised next year.

Longer term the company is looking outward. “We have a lot of ground in the Congo. We’d like to see geographical diversification outside of the Congo”, says Mr LaValliere. Anvil certainly looks well positioned to pick up new ground. The money raised earlier in the year should, says Mr LaValliere, be enough to last the company for three years. Its shares would make a decent currency for acquisitions too, trading on 8 times 2007 earnings and even offering a nominal yield. That’s assuming that the Congo remains a half way decent address of course, but managing director Bill Turner is quite happy abut that.