analysts tout possible t/o

  1. 934 Posts.
    From Egoli :-

    WMCR mettle to be tested in 2004: broker
    27/05/03 By: MiningNews.net

    Incosistent production and cost performance in recent times has Citigroup Smith Barney flagging 2004 as an acid test for WMC Resources (WMR). The big brokerage is looking for proof the miner can deliver during a year when each of its operations is expected to produce close to capacity, and says failure will cause valuation reassessment and likely share price under-performance.

    Its current recommendation for WMCR has, at $3.78 a share, been downgraded to "underperform/high risk" from "inline" because WMCR is more expensive than Rio Tinto or BHP Billiton on a price/NPV basis. Smith Barney has dropped its NPV estimate by 20% to $3.70 a share, with around 70% of the change currency driven and the balance based on changes to operating assumptions.

    In terms of production the brokerage is tipping 65,000t of refined nickel - slightly down on 2003's output due to scheduled maintenance - and 225,000t of copper, around 10,000t below WMC's management forecast.

    Smith Barney's copper number is based on the timing of the copper SX plant recommissioning following a fire in 2001 and general smelter capacity. Meantime, the Phosphate Hill fertiliser mine is expected to produce at full capacity of 960,000t.

    On the corporate activity front, Smith Barney said WMCR would likely rate an attractive option to Rio, BHP, Anglo American and Xstrata. Potential values calculated by Smith Barney ranged from $4.10-4.60 a share using an 8% real discount value to $3.10-3.70 per share at 10%.

    The broker also flagged the chance of a predator/suitor overpaying - the so-called "winner's curse" - with Anglo's acquisition of the Disputada copper mine a case in point. "Disputada extrapolations would imply a maximum takeover valuation of WMR of $4.30-5.15 a share depending upon discount rate," Smith Barney said
 
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