Cash-flush Anvil may consider acquisitions
Source: Miningweekly.com
By: Liezel Hill
Published on 18th August 2008
Copper-miner Anvil Mining will certainly consider acquisition opportunities, in the Democratic Republic of Congo and elsewhere in Africa, but, for now, is mainly focused on completing its Kinsevere Stage II project, investor relations VP Robert la Vallière said on Monday.
La Vallière was commenting on speculation by RBC Capital Markets analyst Cailey Barker that the firm could use its strong cash position as a 'war chest' to embark on merger and acquisition (M&A) activity.
Anvill produces copper from three mines in the DRC, although mining operations have been halted at one of them – the Mutoshi mine – while it considers alternative mining methods and studies the feasibility of building an SX-EW facility at the operation, after poor results from the existing heavy-media separation (HMS) plant.
The company currently has $146-million in cash, and will receive another $296-million this quarter, after placing about 23,7-million shares with Dan Gertler-linked Catala Global.
The miner has indicated that it plans to use the cash on hand for its Kinsevere Stage II and Mutoshi SX-EW projects, but Barker is not convinced.
“We believe part of this may be used as a war-chest for potential M&A activity,” Barker said, in a note dated August 14.
“He's right that we do have a solid cash position, with no debt,” La Vallière agreed in a telephone interview from Montreal.
“We are looking...but at the moment the focus of our company is on completing the Kinsevere Stage II project on schedule.”
With regard to potential targets, the company would not limit itself to the DRC, although it would not likely look outside of the African continent, La Vallière indicated.
ON TARGET?
When it presented its second quarter results last week, Anvil maintained its production forecast of 47 000 t of copper and 950 000 oz of silver for 2008.
However, Barker raised concerns over whether the company will meet its targets at the Kinsevere operation, where it “appears to be having issues commissioning one of the electric arc furnaces”.
The analyst reduced his 12-month target price for Anvil to C$15,00 a share, but maintained a recommendation of 'outperform, above average risk'.
During a site visit to Kinsevere earlier this month, it appeared that Anvil was “encountering difficulties in hot commissioning the second furnace”. Barker said.
The company has now pushed back the commissioning of the second electric arc furnace to the fourth quarter of this year, citing technical problems, and this is expected to affect production for the remainder of the year.
However, in contrast, the HMS plant at Kinsevere was working well and the recent addition of gravity spiral separators had been commissioned “without problems”, Barker said.
Shares in Anvil were trading at C$7,39 a share at 13:16 ET on Monday, a decline of 0,4% for the day.
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