Credit Suisse says "production Outlook In-Line; Las Cruces
Continues to Deliver; Raising Estimates"
Event: "IMN released FY12 production results and FY13 production
and cash cost objectives for its operating mines."
View: "In-line; Las Cruces delivers another strong quarter. IMN
expects FY13 copper production of 103.6-116.3Kt - in-line vs. our
111.2Kt. FY13 zinc production of 56.2-62.4Kt was also in-line vs.
our 58.8Kt. FY13 cash costs are expected to average C$0.91-0.97/lb
vs. our C$0.87/lb. FY13 guidance includes Las Cruces production of
68.5-72Kt with cash costs expected to average C$1.10 -1.16/lb -
both largely in-line with our expectations. 4Q12 production also
in-line. IMN also reported actual FY12 copper production of
111.7Kt, which implies 4Q12 production of 27.6Kt - in-line vs. our
27.9Kt, with Las Cruces delivering another solid quarter with
copper production of 17.3Kt (or 96% of design capacity). We are
increasing our FY12/13/14 EPS to C$5.41/C$5.37/C$4.46 from
C$5.14/C$4.23/C$3.56 as we are now capitalizing interest costs
associated with Cobre Panama (previously expensed). The EPS changes
do not impact our net asset value (
) or target price."
Catalysts: "BoD to make formal recommendation by January 24th.
The IMN BoD Special Committee has been engaged in a dual process to
evaluate the FM offer (C$36 cash + 1.6484 FM shares) and explore
all strategic alternatives to create value for IMN shareholders.
The Special Committee is expected to release a formal
recommendation to IMN shareholders by 24 January 2013."
Valuation: "We continue to recommend holding onto IMN shares on
the prospects for a higher bid valuation. Our TP of C$80/share is
based on 1x our NAVPS of C$79.97/share. We estimate a potential
combination with FM is breakeven to FM's NAV at C$80 per IMN share
using our expansion-case assumptions for CP (C$7.1Bln capital
costs, 10% discount rate) and assuming no synergies or cost savings
at Cobre Panama."