1stPNA - PAN AUSTRALIAN RESOURCES LIMITED Credit Suisse rates...

1st


PNA - PAN AUSTRALIAN RESOURCES LIMITED
Credit Suisse rates PNA as Outperform (1) - The company has agreed to buy a majority interest in the Inca de Oro Project in Chile but the broker sees it as too early to form an opinion on the deal, though on face value it appears to be a relatively low cost entry into the project.
With no changes to its numbers at this stage the broker retains its Outperform rating and $0.65 price target.

Target price is $0.65 Current Price is $0.47 Difference:$0.19 - (brackets indicate current price is over target). If PNA meets the Credit Suisse target it will return approximately 40% (excluding dividends, fees and charges - negative figures indicate an expected loss).

The company's fiscal year ends in December. Credit Suisse forecasts a full year FY10 dividend of 0.00 cents and EPS of 6.98 cents .

At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 6.66.

This company reports in USD. All estimates have been converted into AUD by FNArena at present FX values. Market Sentiment: 0.8

2nd

UBS Investment Research
PanAust Limited
PanAust to acquire stake in Inca de Oro
�� Event: Binding offer to acquire 66% stake in Codelco project
PNA has made a $45m binding offer to acquire a major interest the Inca de Oro
copper project in Chile from the state owned copper giant Codelco. The project is
undergoing a pre-feasibility study with results due in the June quarter. The
resource stands at 259Mt at 0.6% Cu equivalent (0.46% Cu, 0.13g/t Au and 0.01%
Mo). Ongoing studies indicate that it could sustain production of 50kt Cu and
40koz Au over a 10-year life. Assuming the Phu Kham blueprint could be applied
to the project, Inca de Oro has a good chance of being developed, in our view.
�� Impact: Minimal immediate impact, deal funded from cash reserves
Assuming Presidential approval, the initial funding of US$45m can be met from
PNAs cash reserves. Additional calls for short term funding are unlikely with a
full bankable feasibility study and the potential development decision point still
12-18 months away.
�� Action: Buy maintained leverage and optionality
We maintain our Buy on PNA. On a copper equivalent basis, developments of the
Ban Houayxai and Inca de Oro projects could see output more than double to
~140ktpa by 2014. Subsequently, in our view, PNA offers investors more leverage
and optionality than either of its immediate peers, OZL and EQN. We believe the
deal provides a low cost entry point into the Worlds most prolific copper region
and a significant relationship with the Worlds largest copper producer.
�� Valuation: $0.64/share (DCF, 10% discount rate)
There is no change to our valuation or target price.