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Outperform rating for Inmet on Cobre Panama stake sale - RBC

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Analysts at RBC Capital Markets have issued an outperform recommendation for mid-tier copper miner Inmet, as the $169 million sale of a 20% stake in its Minera Panama operation to Korean Panama Mining Corp (KPMC) closes.

Minera Panama is the owner and developer of the Cobre Panama copper-gold-molybdenum project, located 120km west of Panama City.

“KPMC has acquired its interest for $169 million in cash, which represents 20% of the project development costs to date, combined with the $30 million option price previously paid,” the RBC analysts said in a note on Thursday April 26.

“The previous estimate on the cost of the 20% interest was approximately $155 million.”

This means the final price paid by KPMC is more than 9% higher than originally estimated.

An update on the project’s economics is expected this quarter, followed by news of the selection of a project partner.

“Inmet now holds an 80% interest in Cobre Panama. Finding partners to assist with development of the project is key due to the huge capital expenditures that must be made to bring the project on-line,” the analysts said.

“We estimate capital costs to be approximately $6 billion. An update on project economics along with a basic engineering study is expected to be released by Inmet in [the second quarter].”

The RBC analysts’ outperform recommendation is based on the assumption that Las Cruces, the company’s Spanish copper project, will be able to reach full production in 2012.

“[This will result] in upside potential for Inmet’s earnings and cash flow. [There is also] upside potential at Cobre Panama, and compelling valuation based on our [net asset value] analysis,” they said.

Potential share price catalysts boosters for the company include the partnership process at Cobre Panama, they added.

Inmet’s shares were trading at C$54.35 ($55.12) each at the end of the day on the Toronto Stock Exchange on Wednesday, April 25, up 3.88% compared with the previous day’s close.

Claire Hack 
chack@metalbulletin.com 
@clairehack_mb

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