Analyst Actions: Labrador Iron Ore Royalty Corp Estimates Raised at Credit Suisse

By Midnight Trader,  January 16, 2013, 02:29:35 PM EDT

Credit Suisse says "volume forecasts downgraded, but earnings up on new price deck; Raising Estimates"

"Rio Tinto has reported DecQ12 IOC sales of 3.83mt and production of 3.91mt, both being disappointing relative expectations which sat closer to 4.5mtpa. Full year CY12 sales of 14.1mt was only around 72% of 'nameplate' capacity which increased from 18 to 22mtpa during the year (averaging say 20). Our earnings changes reflect 1) updated DecQ12 volumes, 2) the latest house price deck for iron ore (CY13 now C$120/t from C$111/t rel spot at US$155/t), 3) higher capex forecasts for 2013/14 following recent discussions with the company and 4) lower utilisation factors and hence sales expectations for CY13 and beyond."

"LIF.TO will report its DecQ financials in February, at which time we will be able to derive realised pricing and cash costs. At this stage we expect CY2012 EPS of C$1.52/sh (rel. Consensus C$1.65/sh)."

Key positives: "Rio Tinto has made no change to its previous guidance on IOC's 23.3mtpa expansion timing for MarQ13. Areas of concern: another disappointing reported sales volume sees us downgrade utilisation factors for future periods. Admittedly 2013 was a challenging year, and the 72% utilisation factor for 2012 was partly a consequence of this, but the 90% we had previously been using for forecasts seems increasingly optimistic and we have reduced it to 85% (i.e. name plate capacity x 85% = reported sales)"

"No change to C$33/sh target price or NEUTRAL rating, both of which are based on the house view of iron ore pricing (CY13 US$120/t). On a spot (US$155/t) basis CY13 EPS would go from C$2.60/sh to C$4.15/sh."

Estimates: "We are raising 2013/2014/2015 EPS estimates to C$2.64/C$2.35/C$2.00 from C$2.03/C$1.53/C$1.37, respectively."




The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.


This article appears in: Investing, Commodities

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