EMED, bugger

Never can I recall owning a share like EMED mining where the event driven news was moved forward by one quarter, every quarter. This is now going on for 4 years, so that is 16 postponements of opening the mine in my book.

Unsurprisingly the share price is down again to and now at almost 5 year lows. Sigh, my investment nous has long since departed and my share portfolio seems to ride around every year and somehow or other end up with a zero increase or decrease overall. Very exciting, boring and unrewarding all at the same time.

What a day for EMED to release news though on the first real big day of market sell off that we have had for months. As they say, timing is everything!

EMED Mining Update

It is not often that the stock market offers up a second bite at a nice juicy cherry. However, EMED mining is proving to be just one of those – allied with Management who, it seems, presenting investors with a possible gift this summer.








Back in July I posted a blog (see here - http://www.spreadbetmagazine.com/blog/2012/7/7/emed-mining-trading-call.html) noting that EMED was about to, finally, get the go-ahead for its copper mine in Spain that was acquired from Rio Tinto. Shortly after this, the penultimate piece of the jigsaw was completed with the acquisition of adjacent land parcels that had been used as ransom strips. Then, a couple of weeks later, the final 5% of this key land element was acquired. All of this has come at a cost to the stock price with nearly 25% additional dilution to existing shareholders. Shares were issued to Inland Trading (the owner of the key land parcel) with an ascribed stock value of 10.61p.

Over the balance of the month, the market has slowly marked down EMED shares with the price slipping from 11.25p down to below 9p. Why? Well the landowners extracted a high price so perhaps, along with low summer volumes, this was not seen as a good deal. Also, with final permitting news now due at the end of September, small traders (of which this stock has quite a few smaller shareholders) have decided to look elsewhere in the short-term – volumes have been miserable which would add credence to this theory. Finally, a small placing was done just last week at 8.5p to find the cash needed to progress to permitting when the finance deals kick-in. 18 million shares issued is not much, but still, it has knocked another penny off the share price.

The upshot to all this however is though that EMED is nearly there; just going through the environmental reporting process in Andalucia - the last hurdle. In a region of high unemployment, it must be inconceivable that the mine is not granted permitting at the end of Q3 2012…
As for prospects thereafter, the mine was closed by Rio in 2001 as with a copper price below $1 per pound at that point, it was deemed uneconomic. Today however copper sits at $3.5 per pound even after a heavy retracement in recent months. In addition, as an old mine site, much of the equipment is already in place - only $150 million is needed to start up again – an off-take agreement with a Chinese company who has taken a stake and a loan from Goldman Sachs (no fools whatever anyone says about them) has secured this.

First year gross profits should be $150 million, handy eh? That is a pretty solid ROI. With a billion shares in issue giving a market cap of £90m, and a 5 year DCF value (with a high discount rate used) of around £350m, a share price of about 40p would be a good target – the four analysts who cover the stock range from 32p to 42p.



Closing on Friday at 9p, there is good cause to be bullish here.

This post is sponsored by Spreadbetmagazine.

Last chance on EMED before launch?

To be truthful, you should really have bought here at under 10p a share and who knows, with a stock market meltdown just an Israeli bomb away, anything is possible.

However,  long-time readers will know that I have had half a million odd shares in this AIM listed prospective mining company since 2009. In all that time the Company has been seeking to re-open the Rio Tinto mine in Andalusia in Spain. Corruption and general bureaucracy has delayed this event for at least 2 years longer than necessary.

Finally though this month the stars are aligning. Firstly, the corrupt PSOE party in power is about to lose an election in 3 weeks and the incoming PP have opening this mine and getting the desperately needed 1600 jobs up and running.

Then a Chinese company signed an off-take deal to buy the copper that will be produced, guaranteeing future sales. Then yesterday, Goldman Sachs was appointed, again via an off-take deal, to produce the £175 million of financing. This is all the money the company will need to re-start production at the mine.

When up and running the mine should produce about $150 million a year in profits, so the debt won't take long to pay off, on a DCF of 10 years you would expect EMED to be a billion pound odd business. At 14p which it is today it is valued at £120 million, so this share could eventually go for nearly 100p (there are some future options which will dilute away some of the value).

Even better, having met the CEO a few times, the Company has a strong management team who have piloted this through 4 years of pain and frustration and now pulled off some great, pre-start deals - strong management is the key to any good company, especially on AIM

Personally I see the final permitting as pushing this share at least 100% over where it is today, with 70-100p over the next 2-3 years.

(NB As this is dual listed, you can buy in an ISA)

More investment disasters

I have had a bad run recently with my investments; probably deserved after years of huge success. However, today is an interesting one due to news out of EMED mining.

Now as before, EMED are trying to re-open a copper mine in Spain and it is proving very troublesome. Today they finally announced the news that the Government departments have approved their plans, however this is tempered by the fact they have also extended the area the want EMED to be environmentally responsible for clean-up of. This latter news means another delay whilst they look into this and probably a cost in the future to the project.

Overall, it is not great news so the share price is off 20%, on the other hand the mine is now really going to open after nearly 6 years of trying. So wwe are looking at Q3 or Q4 this year for final approval (it was supposed to be Q2).

EMED is now 13p a share; the target projected price of brokers is 32p, 52p, with 70p as an optimistic level from one. I would be happy with 30p pre-opening and moving up to over 50p in 2012. A 300% opportunity - so a good time to buy in over the next few days/weeks as the shareprice settles.