Finders is an emerging low cost copper cathode producer, developing a high grade 25,000 tpa copper mine on Wetar Island in Indonesia, plus a highly prospective, advanced gold-silver exploration project in Sumatra.
Finders Resources: finnCap analyst expects shares to increase in value
Finders Resources (ASX:FND) announced this week it has completed its bankable feasibility study (BFS) for the Wetar copper project
Mine developer Finders Resources (ASX:FND) announced this week it has completed its bankable feasibility study (BFS) for the Wetar copper project - confirming the ‘robust economic viability’ of the 95 percent owned project on the Indonesian island.
It comes after the award of the mining permit for the project earlier this month and the BFS - a review of the 2009 study - will now be used as the basis of a mandate for project financing. It plans to finalise the details with lead arrangers next month.
The BFS base case puts the project’s NPV (net present value) at US$304 million, which gives a 62 percent internal rate of return (IRR) and puts the project’s payback period at 0.9 years.
In a note to clients finnCap analyst Joe Lunn had said he expected the shares to increase in value, as mine development is de-risked further.
“The shares continue to trade on a 60 percent discount to the base case because of financing risk and the pending award of the forestry permit, but we expect both these risks to have been removed in July.
"Thereafter, we expect the shares to increase in value towards our fully diluted valuation of 77 Australian cents per share,” he said.
In a further research note, the analyst said: "The decision to use marine fuel oil as a cheaper alternative to diesel means that operating costs only suffer a 9 percent increase since the 2009 study and now average US$1.09/lb over the life-of-mine (LOM)."
He added that the 31 percent increase in capex to US$155 million was due to higher local currency costs, the bringing forward of previously deferred items, and decisions about purchasing rather than leasing items.
"However, the key point is that, at current copper prices, project payback is less than 1 year, with EBITDA margins exceeding 75 percent," he said.
Referencing financing, he said discussions with a number of banks have been ongoing for two years. "We understand that the banks have a history of providing new mine project finance in Indonesia so are comfortable with the macro risk profile," he said.
The analyst went on: "We expect copper cathode production at Wetar to restart in Q4 at a 5tpd run-rate. This run-rate will almost quadruple in Q3 2012 when the expanded demo plant goes live. Full production from the main plant has been increased by 2,000t to 25,000tpy and this run-rate will start at the end of 2013."
