EMED Mining: Base Case Valuation Remains At $209 Million

While Emed Mining Public Ltd, (EMED) continues to make good progress on the permitting related to restarting the world-class Rio Tinto copper project in Spain, it will continue under new management. Effective 19 September, Harry Anagnostaras-Adams resigned as MD and CEO and Rod Halliday has been appointed interim CEO. The company states it is in the final stages of permitting, which will allow the project’s restart, initially at the Cerro Colorado open pit around the end of 2013, with commissioning expected around H115. Following the initial start-up, EMED aims to expand the open pit and restart the higher-grade underground mines on the property.

AAU and Administrative Standing pending
A 30-day public comment period on the Environmental Plan for the Rio Tinto project began on 14 September 2013, having been updated for the changes to the tailings management facility that was agreed in May 2013. This is required for granting of the Administrative Standing for EMED’s mineral rights over the world-class Rio Tinto mining district. The Andalucian government has publicly reaffirmed the feasibility of issuing the two principal permits required to start pre-production work around the end of 2013. The approval of the Environmental Plan followed by granting of the Administrative Standing will trigger the initial work at the Cerro Colorado open pit.

Completion of loan note subscription
On 15 July 2013, EMED announced the completion of a £9.6m (€11.1m) financing for convertible secured loan notes issued to existing customers Yanggu Xiangguang Copper (XGC) and Red Kite. The notes bear 9% interest for the first 12 months and 11% thereafter and could be converted into equity at 9p/share. The funds will be used to continue final permitting and for general working capital. Further funding will be required as the company moves from final permitting to restarting activities.

Valuation: Base case valuation remains at US$209m
Assuming EMED achieves commissioning H115, we maintain our SOTP valuation at US$209m or 11p/share, with the potential expansion to 12Mt/year (US$303m or 16p/share) or 15Mt/year (US$397m or 22p/share) as published in our 23 May 2013 note. Our valuation is based on a long-term Cu price of US$2.96/lb, which remains unchanged. We have updated our financial model based on EMED’s 2013 interim results and the completion of the £9.6m loan note subscription.

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