SBM Buy recommendation
Balance sheet
Funding requirements
As of 31 December 2011, EMED had £7.8m in cash on the balance sheet, and subsequently raised c £13.2m (US$20m) as part of the arrangements with XGC; allowing the company to continue with care and maintenance costs, permitting, detailed engineering, other professional services and site security costs. Should approval of the restart be received (environmental, project and Administrative Standing), EMED would be able to trigger project financing. It intends to trigger the project at that stage and to commence further exploratory drilling and resource delineation at the various deposits at the Rio Tinto mine with a view to expansion beyond the initial base case 9Mtpa ore throughput for 37,000tpa copper-in-concentrate.
On the basis of the Goldman Sachs funding arrangement and the company’s estimates of planned capital expenditure and working capital requirements of US$200m (€160m) over FY13 as well as annual corporate overheads similar to FY11, we estimate the company will have a maximum funding requirement of c €186m in FY13. Should the funding arrangement be contractually agreed, EMED will be fully funded to commence mining operations once restart approval is granted. At the current price of 11p, EMED’s shares are therefore trading at almost a 60% discount to this valuation unwarranted in our opinion.
July 2012 | www.financial-spread-betting.com | 83