Latest Paradigm Capital research comments
Event
A recent, well‐attended analyst/investor trip to Anvil Mining?s flagship Kinsevere Stage II Copper facility left many impressed with the quality of work completed to date (as well as the overall quality of the asset). Anvil is set to begin ramping up during Q2 toward reaching a targeted initial production rate of 60tpa of refined copper cathode by Q3.
Details
Kinsevere Stage II construction is now officially fully funded with the continued strategic financial support of Trafigura. Also, on December 31, 2010, Anvil had cash
balances of $56.0M, and the company still continues to work on refinancing a $100M Trafigura Project loan facility with a number of banks.
The site visit served to confirm the impressively large scope of on‐site activity, leading to the conclusion that production ramp‐up will meet its Q2/11 target.
Ausenco‐Bateman engineered and constructed Kinsevere Stage II. Ausenco‐Bateman was responsible for the construction of Freeport?s (FCX‐N, NR) Tenke copper production facility, which is currently operating at ~115% of design capacity.
Total cash costs at Kinsevere Stage II, including royalties, are expected to be low at an estimated LOM average of $1.00/lb Cu (C1 costs are even lower at ~$0.89/lb Cu)
Conclusion
Anvil Mining is a Paradigm Base Metals Top Pick, primarily because it is one of two major independent copper projects coming into production in 2011. The Kinsevere Stage II
flowsheet appears to be simple as the presence of cobalt is minimized. In addition, Anvil currently has a large, high‐grade stockpile ready and waiting to feed the plant. These
positive factors lead to the conclusion that the ramp‐up at the facility should allow Anvil to meet its 60tpa (~130M lb) copper cathode production target rate by Q3 of this year
with ~40t of copper expected for calendar 2011. Anvil is in the perfect position to take advantage of the positive fundamentals supporting increased copper prices. We have
incorporated our new copper price deck into our Kinsevere Stage II model, which increases our NAV to approximately $9.18/share. As a result, we are increasing our target
price to $9.25 based on a ~1.0x NAV multiple. We continue to see Anvil Mining as one of our top picks. We maintain our Buy Recommendation.
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