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Message: RBC: WEZ BFS improves PTM target: $6.60
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Well, it looks like the folks at RBC have come to the same conclusions that we've been talking about here: WEZ's positive BFS on its WBJV Project 2 reveals a large gap between PTM's market valuation and its assets. Some highlights [emphases are mine]:
"WEZ BFS carries promise – The positive Bankable Feasibility Study (BFS) indicated an increased production level of 230kt/month from thepre-feasibility study's 180kt/month over a 35 year life of mine. The project Net Present Value (NPV) based on the BFS amounts to R9.5 billion despite an increase in capital cost to R5.6bn from a previousR3.5 billion."
[ed - ok -- they recognize the importance of the positive BFS and its value]
"Great value to be unlocked - Based on the project NPV, PTM's 18.5%portion is worth R1.75bn (C$225 million). This compares to PTM'scurrent market capitalization of C$183 million. This implies that the value of PTM's exposure to Project 2 is not reflected in the shareprice or that one is only paying for this and getting everything elsefor free (PTM's 37% exposure to WBJV Project 1 and 3 plus War Springs and the Canadian exploration projects)."
[ed - in other words, the value in P2 alone is sufficient to justify PTM/PLG's current market cap. The market is completely ignoring the other assets. They also seem to be implying that P's 1,3, War Springs + Canadian projects are about equal in value to P2. This, in my opinion, will prove to be false. Project 1 is FAR more valuable to PTM (and by extension, her shareholders) than P2. In fact, they go on to almost say as much]
"- This is a clear indication that there is a lot of value not currently reflected in the share price. PTM is scheduled to release the BFS for its flagship WBJV Project 1 by mid 2008. We expect the results of this BFS to be positive as the relatively-shallow and high grade nature of the resource will ensure that the benefit from the higher metal prices outweigh any cost and capital escalations, potentially unlocking further value in the share."
"WEZ BFS boosts value - The higher planned production level from Project2 increased its NPV, lifting PTM's valuation, due to its 18.5% exposurein the project. We have also revised our WBJV Project 1 model(discovering an exchange rate error), which also contributed to ahigher NPV for this project. On the negative side we now reduce theprevious low value ascribed to WBJV Project 3 and War Springs in PTM'sto zero. PTM is expected to release more information on these projects at which time they could add more value to the already positive picture."
[ed - They realize the increased value implied in the P2 BFS and give it full value. But they are conservative folk, so they discount to zero the value of PTM's two least valuable projects. Once the positive BFS comes out on Project 1, and it is given full value, I am sure RBC's target will be increased substantially yet again.]
You can download the report here:
http://www.zshare.net/download/1005485077e61346/
D.
"WEZ BFS carries promise – The positive Bankable Feasibility Study (BFS) indicated an increased production level of 230kt/month from thepre-feasibility study's 180kt/month over a 35 year life of mine. The project Net Present Value (NPV) based on the BFS amounts to R9.5 billion despite an increase in capital cost to R5.6bn from a previousR3.5 billion."
[ed - ok -- they recognize the importance of the positive BFS and its value]
"Great value to be unlocked - Based on the project NPV, PTM's 18.5%portion is worth R1.75bn (C$225 million). This compares to PTM'scurrent market capitalization of C$183 million. This implies that the value of PTM's exposure to Project 2 is not reflected in the shareprice or that one is only paying for this and getting everything elsefor free (PTM's 37% exposure to WBJV Project 1 and 3 plus War Springs and the Canadian exploration projects)."
[ed - in other words, the value in P2 alone is sufficient to justify PTM/PLG's current market cap. The market is completely ignoring the other assets. They also seem to be implying that P's 1,3, War Springs + Canadian projects are about equal in value to P2. This, in my opinion, will prove to be false. Project 1 is FAR more valuable to PTM (and by extension, her shareholders) than P2. In fact, they go on to almost say as much]
"- This is a clear indication that there is a lot of value not currently reflected in the share price. PTM is scheduled to release the BFS for its flagship WBJV Project 1 by mid 2008. We expect the results of this BFS to be positive as the relatively-shallow and high grade nature of the resource will ensure that the benefit from the higher metal prices outweigh any cost and capital escalations, potentially unlocking further value in the share."
"WEZ BFS boosts value - The higher planned production level from Project2 increased its NPV, lifting PTM's valuation, due to its 18.5% exposurein the project. We have also revised our WBJV Project 1 model(discovering an exchange rate error), which also contributed to ahigher NPV for this project. On the negative side we now reduce theprevious low value ascribed to WBJV Project 3 and War Springs in PTM'sto zero. PTM is expected to release more information on these projects at which time they could add more value to the already positive picture."
[ed - They realize the increased value implied in the P2 BFS and give it full value. But they are conservative folk, so they discount to zero the value of PTM's two least valuable projects. Once the positive BFS comes out on Project 1, and it is given full value, I am sure RBC's target will be increased substantially yet again.]
You can download the report here:
http://www.zshare.net/download/1005485077e61346/
D.
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