Our site visit confirmed that FND has done an excellent job in building Wetar, which, is now on the cusp of reaching nameplate capacity of 28kt of Cu per annum. Dec Q guidance of ~6.5kt of Cu is maintained and we forecast AISC of ~US$1.30/lb at this production rate. Once ramped up, FND will look at numerous value accretive opportunities including optimising production from Lerokis, improving heap recoveries and efficiencies and drilling at Meron. Our valuation remains at $0.31/sh and we expect once cash starts being generated and exploration delivers, the stock will re rate.
Key Points
·We conducted a two day site visit to Finders Resources Wetar Project located on Wetar Island, Indonesia.
·In a remote, challenging environment we were very impressed with progress to date with FND on the cusp of name plate capacity of 28 kt of Cu pa. It is now regularly producing at 80-90% of nameplate at around 60-65t per day (nameplate is 76t of Cu cathode per day).
·Site personnel, led by Dean Stuart – General Manager were highly competent and impressive. With only 14 ex pats on site, local employment from the nearby village is at 50% and the soft community issues that can really affect projects appear to be in hand.
·The site footprint is larger than anticipated reflecting the very steep terrain and lack of flat areas to put key equipment on. The transformation from the original steep valley to a mine site is an impressive engineering feat.
·Once additional lead anodes arrive in the next two weeks, the amps on the second rectiformer can be increased from ~13,000 amps to 22,000amps which should result in Cu production reaching design level.
·FND has reiterated Dec’Q guidance of ~6.5kt. We forecast AISC of US$1.30/lb at this production rate.
·Target crushing and stacking of 2.8mt of ore by the end of Dec’16 is currently ~270kt behind schedule. However, recent improvements, including emulsion blasting, should see the target achieved.
·We also visited the Lekoris project which is located 4km and 500m above the plant. FND plan a 35 hole drill program for infrastructure, steriliszation and addition resources and it remains a key growth area with resource expansion potential.
·We forecast CY’17 production of 28.1kt of Cu @ AISC of US$1.29/lb. At our assumed Cu price of US$2.40/lb and A$ of 0.75 we forecast this will generate project EBITDA of ~$98m and NPAT attributable to FND of $35m.
·Our valuation remains at $0.31/sh and we believe with FND on the cusp of achieving design capacity, strong cashflow and the re start of exploration than FND can track up towards our valuation. Longer term upside via increased production and extending mine life remain intact and should unfold over the next year.
FND Price at posting:
17.5¢ Sentiment: Buy Disclosure: Held
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