eye catcher, page-4

IGO did a merger some time back - suffered big time (used to hold them) and got hit hard

Pinched this from the IGO thread (dead) and is about a month old:

From MiningNews:
Independence Group (IGO)

Analyst: Trent Barnett, Hartleys
Recommendation: Buy (previously accumulate)
Price target: $3.17 (previously $3.36)
Thursday’s close: $2.97
Reason: The good old days are back
Comments: Independence Group has announced that it will cease exploration at the Stockman project and is “curtailing” enhanced feasibility studies for the foreseeable future. The company is continuing with the government approvals process, though. We have previously highlighted our concern with economics of the Stockman project, so we view this announcement as a significant positive and an indication that the IGO management/board has returned to the ‘good old days’ of a very critical evaluation of investments. The Stockman project was expected to have capex of about $300 million (feasibility enhancements may have reduced that) and the original timeline was for development in FY14. By indefinitely deferring development, IGO free cash flow improves dramatically and so does the company’s ability to pay higher dividends. As a reminder, the Stockman reserve was 8.4Mt at 2.3% copper, 4.3% zinc, 39 grams per tonne silver and 1.1gpt gold with cash costs (LOM) $1.76/lb copper after credits. For FY14, we had not assumed any production from Stockman, and hence our EBITDA estimate is unchanged. For FY15, we have reduced our estimate by only around 10% to $192 million. The significant change in our model is to our net debt assumptions. We had expected FY14 net debt of $203 million, but now we assume net cash of $23 million. And for June 2015, we assumed net debt of $232 million, but now estimate net cash of $71 million. This is a significant and very positive improvement. First gold from Tropicana is expected in September. We value IGO’s share (30%) at 70c per share (NPV $163 million). We are a little concerned that cash costs (ex royalties) will be higher than our estimates (roughly $620/oz for year one), but we believe that our high discount rate more than compensates. We expect to reduce our discount rate to 10% (increases 30% share to 89c/share) once the operation is commissioned and then to 8% (increases 30% share to $1.13/share) once it reaches steady state. We believe that IGO is one of the few resource stocks that has the ability to pay sustainably attractive dividends. The significantly better forecast balance sheet means we believe IGO has a better capacity to increase dividends above our estimates. For now though, our FY14 and FY15 dividend forecasts remain at 15c/share and 20c/share (5cps for FY13). We are moving to buy (from accumulate) recommendation. We suggest that more conservative investors consider waiting for the commissioning of Tropicana in the next three months and certainty on cash costs.