Compass Resources (CMR) – We maintain our Buy
recommendation on this undervalued company. A recent
sell-down by JV partner, Hunan Nonferrous, of half its 12m
share stake in CMR spooked the market but has provided a
buying opportunity. CMR is focused on development of its
Browns project near Batchelor NT. First production from the
base metal Oxides project is set for October. Exploration
has restarted post end of the NT wet season. The record
2007 field season is a 50% increase on the 2006 effort and
includes 35,000m of drilling. Our upgraded $7.40ps valuation
is marginally higher thanks to higher near term commodity
price forecasts. Plans to split the company into three via an
in-specie distribution to shareholders could liberate additional
value, particularly via the spin-out of uranium interests.
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