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Gold/Mining/Energy : Copper - analysis
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From: LoneClone3/30/2007 1:35:38 PM
   of 2131
 
From RBC today

Frontera Copper (FCC) - $4.79 - Raising Target Price
Outperform, Above Average Risk - Price Target: $7.00
Frontera reported adjusted fully diluted Q4/06 EPS of $0.16 versus RBC CM estimates of $0.27 (earnings were adjusted for a favourable $0.11 impact due to income tax adjustments and a foreign exchange gain). 2007 copper production is expected to be 60 mm lbs at a cash cost of $1.10/lb versus the RBC forecast of 52 mm lbs at a cash cost of $1.34/lb. Production reached 75% of its full potential in late March following operational adjustments undertaken to improve recovery rates. Frontera remains confident that it will reach design production of 70 million lbs in 2007, and achieve life of mine average cash costs of $0.80/lb. Management stated that it continues to evaluate opportunities to grow the business through mergers, acquisitions, JVs, and exploration. During the past year, Frontera evaluated 16 projects, 7 of which were copper projects in Mexico. RBC CM thinks that Frontera appears to be within striking distance of achieving designed operating parameters and notes that it is one of the cheapest stocks in their global copper coverage universe, trading at 4.6x and 2.9x 2007 EPS and CFPS respectively, versus the group at 10.9x and 7.3x. The one factor that RBC sees that may cap long term potential for the stocks is the company's hedging program in a positive copper pricing environment. In view of the developments, RBC has raised its 12-month price target from $6.00 to $7.00.
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