It has been a tough slog for Inmet Mining Corp. (IEMMF.PK) as it tried to develop its Las Cruces copper project in Spain. But after overcoming some major permitting challenges, the mine is up and running.
After visiting the site, Canaccord Adams analyst Orest Wowkodaw is very impressed with what he sees.
"Inmet is very close to fully delivering on Las Cruces, which given all of the development delays, will no doubt be positively received by the market," he wrote in a note.
He added that Inmet has put together a very strong operating team, and even though the company is using a unique production process, it is working well. Commercial production is expected in the fourth quarter of this year, and a ramp-up to 72,000 tonnes of copper cathode production a year is expected by the end of the first quarter of 2010.
Best of all, the grade is fantastic, which means very low cash costs.
"We note that with an average [life-of-mine] grade of 6.2%, Las Cruces may be the highest-grade copper mine of scale currently in production anywhere," he wrote.
Mr. Wowkodaw raised his target price on the stock 26% to $63.00 a share. That reflects an increase in his target multiple and higher earnings estimates based on the current copper price, which is well above his target of US$2.25 a share. But despite being impressed with Las Cruces, he downgraded Inmet to "hold" (from "buy") just because of share price appreciation.
He still likes the story a lot.
"With a strong balance sheet, low political risk profile, and a very low cost structure, Inmet remains well-positioned in the base metals complex," he wrote.