By assuming that the current copper price mean reverts to a long term price of US$1.15/lb by CY2012 and Phu Kham hits steady state production of 47,000 Cu/year and 48,000 ounces of gold attributable (plus some rats and mice from Phu Bia gold and Puthep copper). At this production rate and LT metal price, under the company's projected costs, PNA is break even on profits and generates around A$15m/year cash. Discounting this cash stream at a WACC of 9.8% yields a valuation of 23cps. Of course, the valuation is very sensitive to copper price, but US$1.15/lb (nominal)is about 20% higher than what the historic price has been accounting for structural changes to production costs. I would urge you to read the research Credit Suisse has published on PNA, it is in my opinion far more balanced than GSJBW which have some really wild copper numbers they're using, easily the highest in the market. Not to mention that they are also the "house broker" for the stock. It's premature to be counting on upside valuations when the company hasn't even deliverad a mine yet.
Thanks for not tearing my head off, I know that going against the flow can peave some people off. I'm retired from industry and have seen many things like this blow up and have a reality check before hitting (close to) design rates of production. It is historically a dangerous time as now the fairy tale stops and its time to deliver and with GSJBW assumong 30,000 t of copper to be produced in under a year, there is a big expectation that could well NOT be met.
Anyway, good luck with whatever you choose to do.
Duck
PNA Price at posting:
0.0¢ Sentiment: None Disclosure: Held
