Canaccord Morning Coffee
Colossus Minerals* (CSI : TSX : $5.27), Net Change: -0.17, % Change: -3.13%, Volume: 529,077
Freed Capital. Canaccord Adams Mining Analyst Nicholas Campbell raised his target price on Colossus yesterday, after the
company announced an amendment to the Partnership Agreement signed with COOMIGASP as part of its 75% earn-in on the
Serra Pelada project. The most significant impact of the amended agreement is the shift the royalty payments to COOMIGASP
to a life-of-mine-per-ounce royalty from a three-part lump-sum payment at the beginning of the mine life. This frees up CSI’s
capital to be deployed as development capital. The royalty will also be payable on all precious metals, whereas the previous
agreement was based on gold resources. The amendments also require CSI is to pay COOMIGASP R$350,000 per month
(~US$206,000) until production commences at Serra Pelada and to finance COOMIGASP’s share of the development capital
requirements. CSI is to be reimbursed for COOMIGASP’s share of capex in eight equal quarterly instalments starting in the
second year of production. In Campbell’s previous valuation, he had already assumed that the royalty would be applied at all
precious metals and that CSI would be responsible for 100% of project development capital. With the change in the royalty
structure to a life-of-mine payment, he estimates that with a US$40-50 revolving credit facility, CSI should be fully financed
through to production in late-2011. After incorporating the recently completed financing and the amendments to the
COOMIGASP partnership agreement, Campbell’s NAVPS estimate has increased, and in turn, so has his target price. |
