is phu kham expansion good news?

Folks,
I'm surprised there has been no comments so far regarding yesterday's announcement. This may explain today's SP fall when other CU miners and CU price were up?

I see the ann as good news but it seems some brokers have downgraded us?

Quoted from Share Cafe....

"Other than a European crisis blip, the copper price has risen steadily since January 2009 back towards all-time highs. Despite its outperformance, analysts are more keen on copper than any other base metal. The simple truth is that world-class copper finds are very thin on the ground these days, and very thin under the ground as well.

Which is leading analysts to assume the world will see a copper supply deficit in the next couple of years, with consumption to wire homes and offices and railway stations in China in particular driving an unquenchable demand side with limited global production growth driving a restrained supply side.

It is for this reason shares in junior copper producer PanAust (PAN) have doubled in price since June, including a 55% jump since August. Not a bad little earner. All bar one of the seven brokers in the FNArena database have had a Buy rating on the stock. At least until today.

Yesterday PanAust announced the expansion of the plant at its flagship copper-gold Phu Kham mine in Laos. At a cost of $110m the plant will see its throughput increased from 12mtpa to 16mtpa. With the copper price heading north, this should be good news.

But the reason for the plant expansion is the expected decline in copper grades at Phn Kham from 2012, hence the plant expansion will merely serve to maintain copper production levels, not increase them. Analysts have been anticipating such an expansion announcement, but for BA-Merrill Lynch it seems less copper will be produced beyond 2012 than the analysts had factored in and at a higher cost than forecast. This is not so great news.

Given PanAust's recent outperformance, Merrills has gone the whole double-whammy and downgraded its rating on PanAust directly from Buy to Underperform. Similarly, Credit Suisse has taken its rating from Outperform to Underperform. Merrills and CS are the only FNArena database brokers to respond to the expansion announcement to date, so it remains to be seen whether further downgrades will follow."

Cheers
DaveJ