Analysts are upbeat on this mining and exploration company, writes Penny Pryor.
THIS copper and gold mining and exploration company was established in its current form more than a decade ago but started looking to South-East Asia towards the end of the 1990s. It acquired controlling interests in a project in Thailand in 1999 and its cornerstone project in Laos in 2001.
It is Brisbane headquartered but all its operations are offshore.
Although it reported a loss for the past half-year, most analysts researching the stock are optimistic, with seven out of 12 rating it as a buy.
Its cornerstone Phu Kham Copper-Gold Operation in Laos was brought on stream in April last year and started commercial production of copper-gold oxide in June 2008.
It has just completed its first 12 months of operation and had no lost time injuries (LTI) ¨C a total of 6.5 million hours with no injury that would have prevented any employee working.
That's rather remarkable considering the Australian open-cut metalliferous mining industry performance of 1.8 LTIs per million man hours during 2007-08.
And although it reported an interim net profit after tax (NPAT) loss of $US15.8 million for the first half ended June, that included $US19.1 million in one-off costs associated with a share-option expense and a redemption fee for the repayment of a debt facility with Goldman Sachs JBWere.
The company is also about to receive a $216 million investment from Chinese Guangdong Rising Assets Management after the Chinese Government approved its investment in the company. That, along with an equity raising earlier this year, has helped knock its gearing level to less than 20 per cent, not a bad thing in the current environment.
And if the copper price continues to rise, admittedly off a rather low base, its outlook may be even rosier.
UBS is so optimistic it has made it its preferred Australian copper stock.
¡°[This] is due to its solid operating performance and [options] for expansions at Phu Kham and the potential development of the Ban Houayxai gold-silver project,¡± the broker writes in a report.
The Ban Houayxai project is in the south-west of the Phu Bia Contract Area in Laos and had a pre-feasibility study completed on it in September last year, which revealed the potential to produce 100,000oz to 130,000oz of gold and 700,000oz to 800,000oz a year of silver over a minimum period of six years.
Although currently trading at about 40 cents, UBS has a price target of 59 cents on the stock. RBS has a price target of 47 cents but Citigroup's is 42 cents, due to a more conservative commodity price outlook.
> ADVANTAGES
¡ö Improving copper price
¡ö New project potential
¡ö Major Chinese investor
> DISADVANTAGES
¡ö Volatility of commodity prices
¡ö Exchange rate
¡ö Country risk
> VERDICT
Although commodity prices are volatile and PanAust has just one major project online, it has identified other opportunities that could eventually turn it into a much bigger player.
PNA Price at posting:
$2.20 Sentiment: Buy Disclosure: Held
