Bell Potter has posted a 12th Month buy target for GBG at...

Bell Potter has posted a 12th Month buy target for GBG at $1.30.. Some interesting insights


"Gindalbie Metals (GBG.AX - A$0.66) Buy Target: A$1.30
Moving towards production in 2012
• Karara project tracking to revised schedule
GBG reported an interim loss of $13.6m in February. Despite the hematite operation being cash positive, the
negative result was driven by an FX loss. However, the result is largely irrelevant, with the key issue for GBG in
2012 being the completion of the Karara magnetite project without further delays or cost overruns. According to the
interim report, the project remains on track to make its first trial shipment in the September quarter 2012. The
infrastructure is well progressed and should be available in the first half 2012, and the concentrator is in the SMP
(structural, mechanical and piping) stage.
• Funding uncertainty is weighing on the stock
The project remains underfunded by $150-200m at current exchange rates, however this should be covered by
additional debt if required. The interim report suggests that discussions have been held with China Development
Bank on the matter. However, timing could be an issue, and if the Karara JV is not 100% confident that the funds
will be available on time, it may need to seek alternative funding. Hence, we have considered a scenario where the
current shortfall plus an additional overrun is covered by equity and find that the stock is still undervalued compared
to our 12 month valuation for Stage 1, $1.10/sh.
• Investment View - Maintain Buy on 12 month view
GBG is trading at a discount to our valuation, presumably due to funding uncertainty. We believe this is a valid
concern and do not expect the stock to re-rate until the project is complete which may not be until late 2012/early
2013. However, once the uncertainty is resolved, even considering the possibility of further dilution, GBG is
undervalued. Our price target of $1.30/sh (previously $1.33), gives 80% weighting to the Stage 2 expansion to
15Mtpa, with potential for 16Mtpa, plus some value for the 100% owned Lodestone and Shine projects which could
leverage off the significant infrastructure developed for Karara."