Anvil Mining: Poised to Become a Mid-Tier Producer

RBC Capital Markets initiated coverage of Anvil Mining Ltd. (AVMNF.PK) on Wednesday. It rated the copper miner, focused in the Democratic Republic of Congo, an "outperform" stock with a target price of C$16.

Analyst Cailey Barker wrote in a note that despite the high political risk for miners in the DRC, Anvil Mining has an impressive track record, having brought three mines into production, with plans to raise production from 40,000 tonnes in 2008 to 80,000 tonnes in 2011.

Ms. Barker wrote:

As Anvil moves to a mid-tier producer we would expect it to move up the value curve, commanding EPS multiples and a higher premium in the market.

According to the analyst, political risk in the DRC revolves around two issues:

• An ongoing mining license review, which could take three to six months to complete.
• A potential cash pay-out of C$150-million for the Kinsevere mine.

Depending on those outcomes, the best case scenario would pin the miner net asset value at C$19.69, worst case scenario at C$13.25.

Foreign firms have showed renewed interest in copper mining in the DRC after the end of a brutal civil war in 2003. Copper prices have risen by 54% compared to two years ago, but dropped by 17.2% in the last month since their high on May 5. This recent drop is attributed to a softening demand, as the U.S. real estate outlook continues to worsen.