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Cape Lambert Resources Given Speculative Buy Rating And Revised Price Target

Cape Lambert Resources (ASX:CFE) has been given an analysis by stockbroker CANACCORDGenuity which re-iterated a Speculative BUY recommendation on the stock following the dividend payer announcement.

Recently, Cape Lambert Resources announced that it will distribute two $0.02 per share fully franked dividends (A$25m) from the proceeds of its $50 million settlement with Metallurgical Corporation of China (NYSE:MCC).

The company has also reached a $2.4 million settlement with the Australian tax office, which discharges all liability for the A$79 million which had been pursued.

The broker noted:

"The company now stands in a very strong position as a dividend payer with $65 million in cash and no remaining tax liabilities, which is a big turnaround from two months ago when it had $22 million cash and a looming $79 million tax bill.

Other assets within CFE's portfolio are positioning for monetisation in the next six to twelve months which could provide an ongoing dividend stream.

It maintained its SPECULATIVE BUY rating.

Ex-dividend, CFE will have a liquid position of ~$40 million cash, ~$19 million in listed securities and $7 million receivables (convertible notes and debt) which equates to $0.11/share.

The delisting of lithium developer Global Strategic Metals (ASX:GSZ) for relisting on London's AIM market provides a near term catalyst for CFE's 28% shareholding.

CFE still intends to sell its $1/t royalty over the Mayoko iron ore project which we value at US$32 million based on a 5 million tonnes per annum production scenario.

The sale process of the Marampa iron ore project in Sierra Leone is ongoing. The Ebola outbreak may slow the process however CFE believes it will be granted its Mining License in the DecQ'14.

We have increased the risking from 20% to 35% on our Marampa valuation to reflect the stagnant iron ore pricing environment and ascribe a value of A$134m based on our current iron ore price deck.

Maintain SPECULATIVE BUY and decrease our Target Price to A$0.34/share.

We maintain a SPECULATIVE BUY rating and target price of A$0.34 based on a sum of parts valuation formulated from a risked DCF 12% valuation of the Marampa project of A$134 million and the sum of the estimated realisable value of cash, assets and investments held by CFE (A$125m)."

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