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Analyst Actions: Credit Suisse Trims Estimates, Target on Turquoise Hill Resources

Event: "TRQ provided an update on Oyu Tolgoi (OT) project, including filing of an updated technical report (OTRR2013) which replaces the IDOP2012 issued last year. We are lowering our TP to C$10.50 (from C$12.00) and our FY12-15 EPS to reflect actual 4Q12 results and revisions to our OT mine operating assumptions. We are lowering our 2013/2014/2015 EPS estimates to (C$0.01)/C$0.32/C$0.21 (from C$0.30/C$0.94/C$0.77) respectively."

View: "Q4 results not relevant; progress towards OT commissioning, project financing, and Government of Mongolia ( GOM ) discussions remain front & center. With OT Phase I construction 99% complete, TRQ noted that project financing terms & conditions have been generally accepted for a debt ceiling above $3-4Bln, with closing of final binding documentation expected in 2Q13 (in-line). There was no new information regarding discussions with GOM over the IA as both parties continue their dialogue."

Catalysts: "Net OTTR2013 changes reduce our NAVPS ~11%. Numerous scope and scale changes were made in OTTR2013, the most relevant, in our view, include: (1) revised Phase II capital cost (ex-power plant and concentrator expansion) to $5.1Bln, including a +30% increase in direct capital cost to construct the underground mine, versus our estimate of $4Bln); (2) a deferral of the concentrator expansion decision to 160Ktpd to 2015 (in-line); (4) a +36% increase in unit operating costs (first 10 years) to $31.04/tonne (from $22.82/tonne in IDOP2012); and (4) an increase in the peak underground production rate to 95Ktpd (from 85Ktpd)."

Valuation: Our revised TP of C$10.50 is based on 1x our revised cash-adjusted NAVPS of C$10.45/share. In our view, OT remains a strategically significant source of new copper supply and provides investors with exposure to a high quality asset with resource and production growth potential beyond our expansion case. At 25 March 2013, TRQ held a consolidated cash position of $710Mln and $1.8Bln in debt drawn under RIO's interim funding facility.

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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