Referenced Stocks

Analyst Actions: Turquoise Hill "Leaner and More Focused" with Sale of Non-Oyu Tolgoi Assets

By Midnight Trader,  February 14, 2013, 01:24:53 PM EDT

Event: "TRQ announced that it has signed a binding agreement with Sumeru Gold BV for the sale of TRQ's 50% interest in Altynalmas Gold for cash proceeds of $300Mln. Altynalmas holds a 100% interest in the Kyzl Gold Project located in north-eastern Kazakhstan."

View: "We view a leaner, more focused TRQ through the sale of non-Oyu Tolgoi assets as a constructive strategy. We previously carried TRQ's interest in Altynalmas at $370Mln, or $0.36/share in our TRQ net asset value ( NAV ) - so the transaction valuation is a slight discount. On an resources basis, the transaction values Altynalmas Gold at ~$37/oz of contained gold (incl. Inferred) - which is also a slight discount to precedent transactions for development-stage projects of ~$40-50/oz. The transaction is expected to close in 2Q13, and is subject to customary closing conditions, including regulatory approvals from the Republic of Kazakhstan's competent authorities."

Catalysts: "A higher degree of uncertainty has surrounded Oyu Tolgoi (OT) and the OT Investment Agreement since October 2012, following a request from the Minister of Mining to renegotiate the IA (subsequently rejected by TRQ/RIO), Mongolia's budget proposal to increase mining royalties and taxes, and more recently, unsupportive commentary from Mongolia government officials over financing arrangements. Currently, OT is under a stability agreement whereby 34% is owned by the GOM (increasing to 50% in 2030, our assumption) and subject to a 25% corporate tax rate and a 5% royalty. At this time, we do not forecast significant changes to the IA."

Valuation: "Maintain Outperform. Our TP of C$12 is unchanged and based on 1x our revised cash-adjusted NAVPS of C$11.30 (from C$11.35)."




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

Referenced Stocks: NAV



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