🕐18.02.13 - 17:27 Uhr

INVESTEC: KRYSO RESOURCES - DELAYED START-UP HAS NEGLIGIBLE IMPACT ON TARGET PRICE - BUY




Kryso Resources KYS announced today that it would not meet its previous target of completion of construction at Pakrut by Mar’14.

In our view, the market reaction has been excessive, with an assumed delay in start-up having only a mild impact on our valuation and target price.

KYS aims to advise of a new target date in due course.

Meanwhile it has ample cash and available debt facilities to continue with development of the project.

Maintain Buy. * KYS announced today that it had experienced delays in construction activities at Pakrut, with the result that underground construction is unlikely to be completed by Mar’14 as KYS had previously guided.

We had only assumed production from the 2H’14.

* The delayed start relates to logistical issues that the Chinese underground contractor (15th MCC) has experienced in terms of delivering all of its equipment on site.

Without this equipment, it has not been able to make satisfactory inroads into development of the underground decline.

KYS has meanwhile seen good progress from other components of the project’s development, including the road to site and the on-site accommodation camp.

* While KYS aims to advise of a new target date in due course, we have taken the precaution of delaying our assumptions even further and have assumed start of production from the end of 2014, with first impact on the P&L from FY15E. * Our target price is made up of an equal blend of sector relative valuations and NPV.

While the assumed delay has had a 6% impact on the NPV component of our TP, this has been offset by an appreciation in the peer group multiples.
To access the full note please click here Analyst: Hunter Hillcoat
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