Despite loss, EMED CEO upbeat on Rio Tinto project

EMED Mining (EMD-T, EMED-L) posted a net loss in 2012 of 11.5 million Euros ($15.1 million), up from a loss of 9.7 million Euros in 2011. Of the loss last year, 6.8 million Euros were attributed to exploration and care and maintenance expenses and 4.5 million Euros were chalked up to administrative costs.

Managing director and chief executive Harry Anagnostaras-Adams has assured shareholders, however, that the company remains on track to ramp-up production at its Rio Tinto copper project in southern Spain by the end of 2015.

Canaccord Genuity renewed coverage of the development-stage copper company today in a research note with a speculative buy rating on the stock and a price target of 25¢. In Toronto EMED shares closed down 5.4% at 17.5¢.

“Once permitted, EMED should have a relatively short construction/rehabilitation period of 12 months due to a pre-existing mill onsite, existing infrastructure, and a stripped open pit,” Canaccord mining analyst Adam Gofton wrote in a research note today.

He forecasts commercial production will start in the first quarter of 2015 with average annual payable copper production of 100 million lbs. at a cash operating cost of US$1.62 per lb. over a mine life of 15 years.

Gofton argues that the company will have all the permitting in place to begin construction/rehabilitation of the open-pit mine by the end of 2013.

“We have confidence that the project will be permitted given that the only realistic way to rehabilitate the historic Rio Tinto mine is to have a profitable mining company operating onsite,” he says.

Gofton also contends that once the former producing mine is put back into production, it will represent “a unique choice for investors to achieve copper price leverage.”

“We are not aware of any other junior copper developer that can offer investors the combination of a short construction period, low technical risk due to historically proven operations, and initial capital expenditures that are within the company’s financing capability.”

EMED shareholders include Resource Capital Funds (14.2%); Yanggu Xiangguang Copper (11.7%) and RBC Dexia IS Global Securities (8.3%).

Permitting the mine has been slow due to an environmental mess that was left behind by a workers’ collective that operated the mine in the 1980s after Rio Tinto (RIO-N, RIO-L) disposed of it. The mine was shut down in 2000 due to low copper prices of around US$1.00 per lb.

EMED held an option to acquire the operation in May 2007 and did so in October 2008. Since then the company’s primary effort has been on planning and permitting the restart of production from the Cerro Colorado pit, about 65 km northwest of Seville.

The deposit has proven and probable reserves of 123 million tonnes grading 0.48% copper for 585,000 tonnes and measured and indicated resources of 203 million tonnes grading 0.465 copper for 930,000 tonnes.