[2008-04-16]  African Copper Shares Expensive - Analysts
Analysts at Canada's Raymond James say African Copper shares on the Toronto Stock Exchange (TSX) are expensive compared to its peers and the share price is expected to continue underperforming.

The company also trades on the Botswana Stock Exchange (BSE) and the London Stock Exchange's AIM market. Analyst Tom Meyer argued that based on the fact 2009 will be the first full year of production at African Copper's fully owned Mowana Mine near Dukwi. The first copper concentrate is expected to be produced in May 2008. African Copper is considered expensive compared to its peers and judged as set to continue underperforming. Meyer said in a report that African Copper shares traded at a P/NAV of 1.28 times compared to Equinox Minerals trading at 0.66 times and Centenario Copper at 0.52 times.


Raymond James had reduced African Copper's Net Asset Value Per Share estimate from C$1.55 to C$0.78 on the basis of quarterly disclosures and a reconciliation of technical data. The firm said African Copper shares were expensive relative to the copper development peer group which traded at a P/NAV of 0.66 times and the copper producer peer group which traded at 0.87 times. "The company will generate an estimated US$32million in Ebitda in 2009, implying that it currently trades at a 2009 Enterprise Value (EV)/Ebitda of 4.5 times versus the producer peer average of 3.8 times."

Many companies covered by the dealer currently traded at a minimum of 65 percent of their respective all-time highs, but African Copper's share price was at 43 percent of its all time high. "We attribute the poor performance of the share to the significant number of changes in the scope of the Mowana project from inception and the limited exploration success on its very large Matsitama concession. "Despite being in what we view as a copper bull market, the underperformance of African Copper shares relative to its peer group is striking and not likely to be reversed in the coming months." Raymond James reduced its target price for the share over the next six to twelve months from C$1.20 to C$0.60

Production at Mowana Mine is imminent and construction is over 90 percent complete at this point. The company, which received a 25-year mining licence for the operation in December last year, expects to pour the first concentrate at Mowana within the next three months and hopes to achieve commercial production in the third quarter. The company expects to produce around 5, 500 t of copper this year, but will ramp up to output of some 29, 000 t/y in 2012. It currently has over 200, 000 t of ore on stockpile.

African Copper earlier this year inked a five-year off-take agreement for metal produced at Mowana with Switzerland-based MRI Trading.

The Mowana open pit is expected to produce until 2015, but the company is currently studying plans to develop an underground mine on the property. The company recently raised Pula 150 million through the floatation of a bond on BSE.



Source: Allafrica