REMEMBER WHEN.......DEC 22, 2011
Zacks initiates coverage of Petaquilla Minerals
Steven Ralston, CFA
Zacks has initiated coverage of Petaquilla Minerals ( ) with an Outperform rating. Petaquilla Minerals Ltd. is a junior gold production and exploration company with a producing gold mine (Molejón) located in Panamá and other mineral exploration properties in Panamá and Spain. The Molejón gold project in north-central Panamá achieved commercial production in January 2010 and has poured 146,305 ounces of gold. Approximately 567,500 ounces have yet to be monetized from the proven and probable reserve. Production is expected to increase with the recent construction of two on/off leach pads. In addition, Petaquilla Minerals holds the mineral exploration and development rights to 842 square kilometers of concession lands that contain gold, copper and molybdenum deposits in Panamá. Certain mineral concessions, such as Oro del Norte, are being advanced with exploration programs.
The recently acquired Lomero-Poyatos concessions in Spain are also expected to be advanced. Petaquilla Minerals acquired a 100% interest in Lomero-Poyatos through the acquisition of Iberian Resources on September 1st. Based on historical drilling results, a NI 43-101 compliant Technical Report (dated July 29, 2011) estimated that the inferred mineral resource contains 2.07 million ounces gold and 41.98 million ounces silver.
On December 20th, Petaquilla Minerals announced preliminary results for the second quarter of fiscal 2012 ending November 30, 2011. During the quarter, Petaquilla sold 15,959 ounces of gold generating revenues of $25.4 million. Gold poured was 18,100 ounces. The on/off leach pad project is just ramping up and added 180 gold ounces to production. Having commenced production at the end of the second fiscal quarter of 2012, management expects the on/off leach pad operation to recover 3,000 ounces Au during the third fiscal quarter. The company's cash position increased to $12.2 million.
Management’s focus in fiscal 2012 lies in boosting gold production at Molejón gold project, continuing exploration at the Oro del Norte concession, advancing the newly acquired Lomero-Poyatos concessions and pursuing the spin-out of Panamanian Development and Infrastructure Ltd. (the company’s in-house mining infrastructure business that was instrumental in bringing the Molejón mine to commercial production).
Our price target is based on an estimated share value of attributable resources. The methodology ascertains a value for each property and accounts for relevant balance sheet items such as working capital, PPE (property, plant and equipment), marketable securities and debt. The value of each individual property is determined by adjusting the value of current resources for the expected recovery rate, mining/processing costs and net smelter royalties, if any. Only the company’s percentage interest is attributed to the company’s value. Both Molejón and Lomero-Poyatos have 43-101 compliant Technical Reports. Based on our calculation of share value of attributable resources, the target for Petaquilla Minerals stock is $1.70 supporting our Outperform rating.
REMEMBER THIS ONE....... JUNE 27, 2012
Petaquilla Minerals announces preliminary quarterly results
Steven Ralston, CFA
Petaquilla Minerals ( ) hosted its preliminary quarterly results conference call today. During the fourth fiscal quarter, gold poured increased 25.2% sequentially versus the third fiscal quarter from 14,163 to 17,725 ounces, generating revenues of $22.8 million. For the fiscal year ending May 31, 2012, Petaquilla produced 68,000 ounces of gold. With an average realized price of $1,520, the company generated $93.1 million in gross revenues during the fiscal year. Management expects production at Molejón to increase approximately 30% by early fall as the company installs the 7th and 8th leach tanks and the 7th and 8th CIP stacks into the processing circuit. In addition, the installation of a 4th ball mill should be complete by October, increasing grinding capacity by 1,100 tonnes per day.
Within the next month, management expects to file another updated 43-101 reserve report, which will not only include an updated reserve on Molejón, but also an initial resource estimate on Botija Abajo and Brazo. Also, a 43-101 technical report concerning Palmilla and Oro del Norte is expected during the fourth quarter.
The final documentation for the spin-off of PDI was submitted to Canadian regulators this week. The company is now awaiting a response, but anticipates calling a Special Shareholders Meeting in July to complete the process of spinning out PDI to the shareholders of Petaquilla Minerals. In the conference call, management indicated that PDI is expected to generate $45 million in revenues during the first 12 months of independent operation.
At the Lomero-Poyatos concessions, all authorizations to begin the development of the Lomero underground mine have been received. Currently, the development plan is being formulated to dewater the mine and construct a water treatment plant to manage the underground water system. Management is still committed to shipping 20-ton containers of Spanish ore to the Molejón project in Panamá for processing by calendar year-end. With the anticipated gold value between $575 and $720 per ton (average grade between 12 and 15 g/t), along with a high silver content, the project with estimated transportation costs of $75 per ton is considered economically feasible.
Also, in the last few weeks, Petaquilla Minerals filed an updated 43-101 on Molejón and a revised 43-101 on Lomero-Poyatos. The revised technical report on the Molejón project included the addition of a proven and probable silver reserve of 1,008,693 ounces and the identification of 61.4 million tonnes of waste material as construction-grade aggregate. On the other hand, the revised technical report on the Lomero-Poyatos project removed references to the open pit resources since the open pit resources “do not have reasonable prospects for economic extraction at the present time.” However, the Behre Dolbear International report reconfirmed the inferred resource estimates under an underground mining scenario, specifically 6.07 million tonnes with an average grade of 4.25 g/t Au and 88.74 g/t Ag, containing approximately 830,000 ounces gold and 17.3 million ounces silver.
These important modifications affected our valuation model. The revised 43-101 on Lomero-Poyatos reduced the estimated inferred resources from 2.07 million ounces Au and 41.98 million ounces Ag to approximately 830,000 ounces Au and 17.3 ounces Ag (as a result of only in an underground mining scenario). On the other hand, the valuation was enhanced by reducing the life of mine to nine years (conservative in comparison to management’s six-year goal) and by including the silver resource in the model (due to higher confidence in the silver resource). Also, the Forward Silver Purchase Agreement not only motivated us to add the silver resource at Lomero-Poyatos, but also at Molejón. With the issuance of more warrants and options, we began to use fully diluted shares instead of shares outstanding. Lastly, the liability for debt and capital leases was significantly reduced by 40% ($6.5 million). Based on our calculation of share value of attributable resources, the target for Petaquilla Minerals stock has been adjusted to $1.45. We reaffirm our Outperform rating.
AND DONT FORGET ABOUT THIS ONE....Sept 20, 2012
Petaquilla Analyst Day & offer expected from Inmet
Steven Ralston, CFA
There have been several significant developments and announcements concerning Petaquilla Minerals ( ) , ( PTQMF ) in the last few weeks: 1) Inmet intends to make an offer for PTQ (currently at $0.48 per share); 2) management hosted the company’s first Analyst Day and 3) a NI 43-101 compliant reserve report on Botija Abajo was released. In addition, Petaquilla announced a major debt financing both for the development of Lomero-Poyatos and Molejón and for unwinding the forward gold and silver purchase contracts with Deutsche Bank. Incorporating recent developments into our valuation model, we have raised our price target to $1.70.
On September 5, 2012, Inmet Mining Corporation (T.INM, ( ) announced it’s intention to make an offer to acquire all of the outstanding common shares of Petaquilla Minerals for C$0.48 in cash or .0109 Inmet share for each Petaquilla common share or combination thereof. The value of the offer is approximately C$112 million. If the acquisition is supported by Petaquilla’s Board, Inmet would permit the spin-out of Petaquilla’s Spanish assets (Lomero-Poyatos) to PTQ shareholders. Petaquilla’s stock rallied 65.7% to $0.58 on the news.
Inmet is developing Cobre Panama copper-gold project in Panamá. With an estimated capital cost of US$6.2 billion, the Cobre Panama project is fully financed with $4.0 billion to be committed by the end of 2012. Inmet, which owns an 80% interest in Cobre Panama (KPMC owns the other 20%), is a well-capitalized mining company operating copper and zinc projects in Finland, Turkey and Spain.
The offer, when officially made in accordance to the security laws of Canada, is fully financed and does not require approval by Inmet’s shareholders. Also, the offer is contingent on receiving at least 50.1% of Petaquilla’s shares (on a fully diluted basis) and on no further debt or equity financings being completed by Petaquilla, specifically mentioning the recently announced US$210 million debt offering. The Board of Directors and management of Petaquilla are in the process of considering and evaluating the Inmet’s announcement. Meanwhile, management is continuing with the road shows for the planned $210 million debt offering.
In early September, Petaquilla Minerals hosted an Analyst Day in Toronto. Simultaneously, a NI 43-101 compliant estimate for the Botija Abajo deposit was released adding $13.0 million (or $0.05 per diluted share) to the NPV to our valuation model. In addition, to providing an update on Molejón, a timeline was presented for Lomero-Poyatos. As part of a bulk volume test, the shipping of ore-laden earth is still expected to begin in December 2012. A separate processing line will be assembled in Panamá and is currently projected to become operational by June 2012. Management plans for a processing plant in Spain to be constructed within the next 12 to 15 months with processing operations targeted to begin by mid-2014.
These important modifications affected our valuation model. In addition, the recent increase of gold and silver prices added $0.13 to the price target. Based on our calculation of share value of attributable resources, the target for Petaquilla Minerals stock has been raised to $1.70. We reaffirm our Outperform rating.
