Credit Suisse says: "LIM.TO announced two encouraging
developments yesterday; 1) a new two year Iron Ore Sales agreement
with Iron Ore Company of Canada (
) and 2) a $35mn offtake financing with RB Metalloyd."
IOC Sales agreement: "Details of the agreement have not been
provided and are likely to remain confidential, however the use of
a monthly average IODEX price (rather than previous spot) should
result in a less volatile top line for LIM.TO. Our previous
analysis has suggested that LIM.TO may be paying around $21/t for
unloading, material handling and marketing fees to IOC. This should
decrease when alternative port solutions become available to
LIM.TO. The new multi-user berth at Sept Iles was meant to be
completed in 2014, but if LIM.TO is signing agreements like this
with IOC until the end of 2014 it might imply that LIM.TO doesn't
see the new berth being available until at least 2015. If this is
indeed the case, it has implications for other Labrador Trough
producers such as NML.TO/TSMC. ADV.TO will not be in production
until after 2015."
US$35mn off-take financing: "RB Metalloyd, an international
trading house, will purchase LIM.TO's iron ore from IOC on a FOB
basis. A $35mn prepayment will be repaid between July 2013 and
December 2014 over a minimum 3.5mt (implying $10/t repayment
costs). Although not specifically stated, we'd assume that RBM now
has security over LIM's assets - something equity holders should
take note of. The impact of a ~$10/t financing margin on LIM.TO's
operating margin is summarised in full report."
Our target price of C$1.00/sh is based on a book value
Estimates: "We are lowering our FY13 and FY14 EPS estimates to
(C$0.62) and (C$1.11) from (C$0.38) and (C$0.72),
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