Aber strong buy according to Canaccord
* Aber Resources (ABZ : TSE : $7.40) STRONG BUY
52-week price range: $19.50-7.25
Shares O/S: fully diluted 48.0M
Long-term debt: nil
Market capitalization $355.2M
On Monday, Aber Resources announced that the final feasibility study
for its 40%-owned Diavik diamond project will now be completed in
Q2/99, but that the targeted production start remains Q2/2002, and
costs of the additional feasibility work are not expected to be
substantial. We understand that the basic SNC-Lavalin Group
engineering work and the MRDI Canada-H.A. Simons audit is complete,
but, as in the prefeasibility study completed earlier this year, the
perceived delay here has to do with a refinement or optimization of
capital/contractor cost definition. The environmental meetings have
been progressing well since the Sep. 25/98 filing of the assessment
report, and Diavik Diamond Mines (Rio Tinto plc) and Aber anticipate
federal cabinet approval of the project by May-June '99, in time for
equipment orders to be finalized for the early 2000, winter road
transport season.
While the market seems disappointed with the delay in the feasibility
results becoming public, we would expect that, with the incorporation
of the upgrade of the initial production from the A-154 South pipe
following shortly after the A-418 start-up), project economics will
improve significantly. The prefeasibility outline would imply to us
that the project capital cost could be repaid in less than two years,
assuming the production is sold. From Diavik, we expect Aber's annual
after-tax earnings will be in the order of C$2/share beginning in
Q2/2002 and estimate the net, after-tax, discounted cash flow, net
present value in the mid-teens per share.
No credit has been reflected in Aber's share price for its 32%
interest in the Snap Lake, NWT, project or for other exploration
results. Next week we hope to see the Company's Q3 report, which may
include Diavik exploration results from pipes such as the A-180. The
stock remains a STRONG BUY. |
