Celfin Capital Sees Cerro Verde Investing $2.5 Billion In Peru
18 März 2011 - 3:41PM
Dow Jones News
Celfin Capital said Friday that it expects copper-mining company
Sociedad Minera Cerro Verde SA (CVERDEC1.VL) to invest $2.5 billion
in Peru to increase capacity to 220,000 tons a day from a current
120,000 tons a day of copper.
The Peruvian company's main shareholder, Freeport-McMoRan Copper
& Gold Inc. (FCX), stated in its fourth-quarter earnings call
that the feasibility study for the large-scale expansion of Cerro
Verde will be completed this quarter, the brokerage said.
"Management is evaluating a range of expansion options,
including doubling or tripling the concentrator's throughput
capacity," it added.
Celfin also said that it has increased its target price for
Cerro Verde to $54.79 a share. The shares were trading up 0.1% at
$45.50 recently on the Lima Stock Exchange.
It said the new forecast is based on an upwardly revised
forecast of copper and silver prices; an assumption of royalty
payments starting in 2014, once Cerro Verde's stability agreement
expires; and the large-scale expansion of concentrator capacity.
Cerro Verde currently has a tax-stabilization agreement, which
exempts it from currently paying royalties. Celfin said Freeport's
management has stated its intention to negotiate a new stability
agreement alongside its expansion plans.
"For the purpose of our valuation, we assume that Cerro Verde
will continue to pay a voluntary 3.75% contribution until its
stability agreement expires in 2013. After that, we assume that the
company will be subject to pay the full royalty and that the range
applied in the royalty calculation will range from 1.5% to 4.5%,"
it added.
Compania de Minas Buenaventura SA (BVN, BUENAVC1.VL) and a
subsidiary of Sumitomo Corp. (SSUMY, 8053.TO) also have equity
stakes in the company.
The Cerro Verde mine is in southern Peru.
-By Robert Kozak, Dow Jones Newswires; 51-99927 7269;
peru@dowjones.com
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