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Analyst Actions: Credit Suisse Neutral on Labrador Iron Mines

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Credit Suisse says: "LIM.TO has announced a 'strategic relationship' with Tata Steel Minerals Canada (TSMC), that will see a) cooperation and sharing of resources on a number of infrastructure opportunities, b) TSMC will acquire a 51% interest in the Howse deposit for C$30mn (currently scheduled for a 2020 start, 28mt historic resource) and c) joint ownership of the TSMC Timmins 4 deposit. TSMC is 80% owned by Tata Steel, and 20% New Millennium Iron (NML.TO).

"We are positive on this announcement, and see it adding to LIM.TO two key elements that the business currently lacks: 1) cash, and 2) technical/engineering expertise.

"Unfortunately the announcement does not change the fact that LIM.TO's current Silver Yards project needs a 62% IODEX price of US$145-150/t to generate a 15% ROI. We believe that restarting the project in 2013 in an iron ore price environment at or below this level will lead to further value destruction. We'd rather see the project shelved, and shareholder capital saved, until cheaper infrastructure options are available.

"The C$30mn that TSMC will pay for 28mt of historic resources implies around C$1.9/contained tonne. This is a rich price for resources that are non NI43-101 compliant, in our view, and can only be justified if TSMC were to bring forward the current 2020 target start date or if there are some less tangible benefits to be realised by TSMC which are not evident from the press release."

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

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

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