Katanga Mining could be a takeover target: Analyst

Posted: June 25, 2008, 11:49 AM by David Pett

Mining, Takeovers

Katanga Mining Ltd. strong growth profile paints a bullseye on its back, according to new coverage from RBC Capital Markets analyst Cailey Barker.

He initiated coverage on Katanga, a copper and cobalt producer developing mining assets in the DRC, with a "top pick" rating and $22 price target.

"We anticipate that Katanga should become a cash cow, generating net cashflows of over $300-million from 2010, the analyst said in a note. We believe that Katanga should either use this for acquisitions and expansions or become a potential takeover target."

Mr. Barker told clients that Katanga's vast copper and cobalt resource base in the Democratic Republic of Congo should give it a mine life in excess of 25 years.  And while the company has plans to ramp up production from around 25,000 tonnes in 2008 to 225,000 tonnes in 2012, he believes the company has the potential to expand further to 300,000 tonnes per annum.

In addition to Katanga favourable growth prospects, the RBC Capital analyst said he likes the fact that Katanga has a strong base of influential shareholders, including  Glencore Inc. who have a significant position in the company.
 
Regarding the high political risk associated with mining in the DRC, Mr. Barker said the recent mining license review raised "fairly unsubstantial" issues and should not impact Katanga's operation and return.

David Pett




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