2014

Edison Expands Global Mining Sector Presence with Launch of Coverage of MMG

LONDON, October 22, 2013 /PRNewswire/ --

Edison Investment Research, a leading international investment research firm, announces the initiation of coverage of MMG (HKG: 1208), a base metals-focused global resources company and one of the world's largest producers of zinc.

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Edison's comprehensive report, Pursuing growth opportunities, was published today, and examines the investment case for MMG.

Highlights from the analysis by Gavin Wood, an analyst on Edison's Mining team, include:

MMG is one of the world's largest producers of zinc, contributing close to 5% of global production in 2012, ranking third behind Glencore Xstrata (12%) and Vedanta Resources (7%). Following the acquisition of Anvil Mining in 2012, copper has also become a major commodity for MMG. In 2012, we estimate that MMG's average copper and zinc C1 cash costs were US$1.60/lb and US$0.59/lb respectively, positioning it in the middle of the global cost curve for each commodity.

Over 80% of MMG's 2012 zinc production came from the Century mine, scheduled to end production in 2016. MMG is seeking to replace Century's zinc production through its development projects, including Dugald River, a high-grade zinc-lead-silver deposit in Australia, and the Izok Corridor base metals project in Canada. Both developments are currently under review.

MMG reported substantially lower profits in H113. In H213, despite lower revenues, we expect a stable EBITDA, which benefits from a weaker A$/US$ rate. In FY14, we forecast that lower operating costs and a reduction in the depreciation charge will offset weaker revenues and increased finance charges, resulting in a stable profit after tax and EPS increasing by 26%.

We value MMG at HK$1.90/share based on long-term copper and zinc prices of US$2.96/lb and US$1.13/lb, and a 10% discount rate. We see potential upside from several different sources, including internal exploration and development, joint venture exploration projects and potential acquisition opportunities. Our valuation is highly leveraged to the copper price and a 10% increase in the long-term copper price would raise our valuation by 19%.


MMG is a mid-tier global resources company that explores, develops and mines base metal deposits. It currently produces copper, zinc and lead, with gold and silver by-products at its operations in Laos, the Democratic Republic of Congo and Australia, and has two advanced-stage development projects in Australia and Canada.

For the full report see: http://www.edisoninvestmentresearch.com/research/company/mmg

The launch of coverage on MMG marks a further expansion of Edison's worldwide mining coverage. Edison provides research coverage on more than 100 mining companies across the UK, mainland Europe, North America and Australasia. All reports published by Edison are available to download free of charge from its website http://www.edisongroup.com.

About Edison Investment Research

Edison, the investment intelligence firm, is the future of investor interaction with corporates. Our team of over 100 analysts and investment professionals works with leading companies, fund managers and investment banks worldwide to support its capital markets activity. We provide services to more than 400 retained corporate and investor clients from our offices in London, New York, Frankfurt, Sydney and Wellington. Edison is authorised and regulated by the Financial Services Authority (http://www.fsa.gov.uk/register/firmBasicDetails.do?sid=181584).

Edison is not an adviser or broker-dealer and does not provide investment advice. Edison's reports are not solicitations to buy or sell any securities.

For more information please contact:
Gavin Wood        
Edison Investment Research        
+44(0)20-3077-5700
mining@edisongroup.com

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SOURCE Edison Investment Research



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