News & Analysis » UK

EMED Mining: Revised Production and Earnings Forecasts

Contributed by Fox-Davies Capital

Following the release of the updated NI 43-101 report on the 17th February it became apparent that there was a new schedule for the start of production. We have remodelled the project and produced new production and earnings forecasts.

In our last Flashnote on EMED, published on the 18th February 2013, we commented “However, the new schedule for production commences in mid-2014, whereas we had previously assumed production started in the March quarter of 2014". Consequently, we have remodelled the project, with production commencing early in the September quarter of 2014. Both copper and silver price forecasts and the Euro exchange rate are unaltered.

The outcome of this is that the target price has dropped to £0.22. However, this value, assuming a timely start-up may be regarded as a minimum valuation. Fox-Davies assumes that copper prices will decline into the future before reaching a long term price of US$2.25/lb. As part of the financing for the restart of the project, we expect EMED to hedge some of the copper output. The outcome of this will depend on the copper price at the time of the hedging is put in place, but our tentative modelling of such a scenario indicates at least a 10% uplift in the target price.

Further, when the necessary authorisations are in place, EMED intends to commence exploration on the Rio Tinto leases. The aim is to find sufficient ore to increase the mill throughput to 14Mt pa compared with the 9Mt pa in the base case. We have also modelled this scenario, both hedged and unhedged and it effectively doubles the target price. Unfortunately, we cannot include this in our forecasts until the required ore to increase production has been found, but it does give a good indication of the upside in the project.