Imperial Metals\u2019 deal with Newcrest Mining to sell a 70% stake in its Red Chris mine in British Columbia averts a \u201cliquidity crunch\u201d for the Vancouver-based company and will improve execution at the mine, CIBC says.<\/p>\n
The transaction prompted the bank to upgrade Imperial Metals to a neutral rating from underperformer and lift its 12-18 month target price on the stock from $0.60 per share to $3.50 per share.<\/p>\n
News of the transaction on March 11 sent Imperial Metals\u2019 shares surging 57% to $3.10 with nearly six million shares traded. \u201cWe expect Newcrest\u2019s experience in the operation and development of its Cadia (gold-copper) mine in Australia to benefit Imperial Metals shareholders with the turnaround of Red Chris\u2019 current operations, and the development of Red Chris\u2019 underground resource (potential block cave, similar to that of Cadia),\u201d Oscar Cabrera, who covers the company for CIBC, wrote in a research note.<\/p>\n While the investment \u201cshould eliminate Imperials\u2019 liquidity issues,\u201d however, it does come at the cost of transferring \u201cmost of Red Chris\u2019 mineral resource upside potential to Newcrest shareholders,\u201d Cabrera pointed out.<\/p>\n \u201cIn addition, we see limited upside in Imperial Metal\u2019s cash flow generation from its Mount Polley (care and maintenance) and Huckleberry (restarting in 2020) mines over the next two years. Importantly, the transaction is to close in Q3\/19, requiring Imperial to postpone payment to creditors until then (~718 million in debt maturities in Q1\/19).\u201d<\/p>\n During a conference call to discuss the transaction, Newcrest\u2019s CEO, Sandeep Biswas, outlined a two-stage transformation plan for the open-pit mine that he believes will deliver value and will capitalize on Newcrest\u2019s unique technical expertise in block caving, operations optimization and selective processing.<\/p>\n In the first stage, Newcrest will focus on process plant optimization including debottlenecking, recovery uplifts, process control, and improving the quality of the concentrate; mine optimization by improving knowledge of the orebody, grade control, fleet management systems, and mine planning; and trim costs in the supply chain. It will also start an extensional drill program.<\/p>\n The Australian miner also said it will optimize Imperial Metals\u2019 open-pit mine plan and improve production and mill recoveries. The current open-pit mine has an existing 11 million tonne-per-day processing plant and associated infrastructure that gives Newcrest brownfield expansion options, Biswas said.<\/p>\n During the second stage of the transformation, Newcrest will apply its expertise in block caving, coarse ore flotation, mass sensing and sorting, as well as continue exploration at the mine and on the surrounding tenements, Biswas noted, starting with a study on accelerating the development of a larger block cave at Red Chris.<\/p>\n This article first appeared in The Northern Miner<\/a>.<\/em><\/p>\n The post CIBC upgrades Imperial Metals with Newcrest investment in Red Chris<\/a> appeared first on MINING.com<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":" The bank has upgraded Imperial Metals to a neutral rating from underperformer and lifted its 12-18 month target price on the stock.<\/p>\n The post CIBC upgrades Imperial Metals with Newcrest investment in Red Chris<\/a> appeared first on MINING.com<\/a>.<\/p>\n","protected":false},"author":7,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center 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of the transaction on March 11 sent Imperial Metals\u2019 shares surging 57% to $3.10 with nearly six million shares traded<\/q><\/p>\n