As some of the punters on here know I have been a LT bear on this stock for the last year or so. Well common sense has started to be reflected in valuation and I think it is shaping up us a LT buy. The key is that they remain cashflow positive at 1.25/lb as I don't think copper will fall far below this for more than a few months at the most and if at all. The other outstanding is the refinancing of the 80M which I beleive they will be able to do as long as they are cash positive.
I have my own assumptions on costs over the life of mine which are
At 60,000 tpa over 8 years this generates 800M in cashflow from operations. From this they will need to repay the 350M in debt and spend another 50M in sustaining capex leaving a total LOM cash flow of 400M.
Using a 10% discount rate the 400M over 8 years gives an NPV of 267M. Note this excludes depreciation and Tax but at these prices they shouldn't be paying much tax after depreciation)
NPV/Share then is 19 cents
Some value needs to be applied to their other exploration assets which I would give them 5c/ share for.
25c in my opinion is the long run value of this companies stock at $2.20/lb copper. As we have seen the valuation is super leveraged to copper price in both directions.
If they finish Q4 cash positive, not just from operations but as an entity, I will be buying up and looking for a triple bagger over 3 years. If they finish the quater cash negative I think it will be admin for them.
PNA Price at posting:
8.4¢ Sentiment: LT Buy Disclosure: Not Held
