SBM Buy recommendation
Silver credits received under terms at the smelter are valued at a long-term silver price of US$25/oz. On the above assumptions Edison estimate the value of the theoretical stream of potential dividends to shareholders for FY12-28 (discounted at 10% per year to reflect general equity risk) to be 20.6p/share as depicted in Exhibit 3.
We estimate that the fully diluted discounted dividend from Rio Tinto production rises to 31p/share (€39c) in FY19.
We ascribe value to the remaining NI43-101 resource at the Rio Tinto project based on the updated production plans that would have the current copper reserves at Rio Tinto mined over FY14-28. A summary of our valuation of EMED’s Rio Tinto project’s copper resources is presented in Exhibit 5. To the remaining post-mined reserves resource, we apply a resource multiple of US$29.10 per total tonne of NI 43-101 compliant contained copper.
This we calculate from a comparison of several listed, small-to mid-cap copper explorers (Exhibit 4). Although by no means identical to the Rio Tinto project, they nevertheless serve as a useful proxy and means of comparative valuation.
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