Latest recommendation from Royal Bank of Scotland Europe Ltd Cailey Barker,analyst. 28/5/09
Anvil Mining Limited (TSX: AVM; ASX: AVM) Upgrading on Revised Copper Price Forecasts Outperform (prev: Sector Perform) Speculative Risk Price: 1.21 Shares O/S (MM): 101.3 Dividend: 0.00 NAVPS: 3.51 BVPS: 5.48 Tangible BVPS: 5.48 ROE: 29.4% Float (MM): 68.5 Debt to Cap: 1% Price Target: 2.50 1.50 Implied All-In Return: 107% Market Cap (MM): 123 Yield: 0.0% P/NAVPS: 0.3x P/BVPS: 0.2x Enterprise Val. ($MM): 1,126.4 Avg. Daily Volume (MM): 0.21 Strategic Ownership: Event We are upgrading to Outperform and increasing our target price to C$2.50/sh from C$1.50/sh based on revised copper price forecasts. Investment Opinion • We are upgrading Anvil to Outperform based on revised copper price forecasts and minor changes to our model. We have increased our 12 month target price to C$2.50/sh from C$1.50/sh. • Higher copper price forecasts. We have comprehensively reviewed and adjusted our copper price forecasts to reflect a tighter supply/demand balance over the next few years. As a result, we have increased our 2009 to 2012 and long term forecasts for copper. See page 2 for details. • Stage II still waiting in the wings. Anvil's Stage II development for the 60,000 tpa SX-EW plant remains on hold pending funding. Anvil is continuing to pursue $200m in debt funding and SRK Consulting is preparing a due diligence report for a syndicate of banks. The Company hopes to get credit approval in H2 2009 and with the Heavy Mineral Separation Plant back up and running, we believe the worst is behind Anvil and see longer term potential in the Company. • Cash should meet 09 needs. Following the recent equity raising, Anvil has approx $54m in cash which should allow them to scrape through 2009 until it can secure debt funding. • Long term investment. We believe Anvil is best suited as a long term investment as we expect limited returns and news catalysts over the next few years, until the SX-EW is up and running. The key catalyst for the stock is the financing and believe there could be a re-rating when this is finalised. • M&A on the cards? We believe that Anvil could make a good acquisition, merger or strategic partner for another entity, given the quality of the Kinsevere asset. However, we believe the opportunity for a deal is limited, given the size of the project and small number of potential suitors. Valuation. • We are upgrading our recommendation Outperform and increasing our 12 month price target to C$2.50/sh, from C$1.50/sh. Our target NAV multiple is 0.75x NAV versus an industry average of about 0.80x, to reflect Anvil's higher financing risk.
AVM Price at posting:
$1.55 Sentiment: Buy Disclosure: Held
