'Citigroup Research Report 19 March...

'Citigroup Research Report 19 March 2008'

http://www.copperco.com.au/_content/documents/864.pdf

THey give valuation with and without merger and also their opinion on merger.

Here is the summary but worth going to document and reading full report.

Cheers Fero


"
Copperco Ltd (CUO.AX)

Correction: Growth and Development Opportunities Beckon

Re-emphasizing our Buy call

— After seeing ~65% of CUO’s value wiped out in
the recent market rout we are strongly re-iterating our Buy call. Our target price
is slightly lower at $1.20, primarily due to dilution from the recent placement.
With an expansion to 30ktpa now committed to and copper trading at
US$3.75/lb, we expect CUO to bounce hard when the market rebounds.

Expanding to 30ktpa

— CUO has announced that the Lady Annie operation will
expand cathode production from the current 19ktpa up to 30ktpa over the next
15-months. The capex requirement of $32.4m is essentially in the bank after a
private placement for $30.4m was announced simultaneously. Life-of-mine
cash costs are modeled at a highly competitive US¢96/lb.

MXX merger update

— We have run some valuation scenarios on the MXX
(MXX.AX - A$1.01; Not Rated) merger and recognise the deal as remarkable
value. The companies complement each other very well with MXX bringing
development opportunities and CUO providing the cash flow. The MXX market
cap is well below the mark to market value of the listed assets and the book
value on MXX’s unlisted assets are likely to provide substantial upside.

Earnings cut, but still great value

— Our earnings forecasts have been cut by
61%, 29% and 34% for FY08, FY09 and FY10 respectively. The large
reduction in FY08 is due to a lower production forecast (14.3kt down to 11.7kt)
and a higher A$ forecast, also the main driver of the FY09 and FY10 cuts.
However, with an FY09e EV/EBITDA multiple of 2x and a PE multiple of 2.8x,
the stock represents outstanding value in the sector."