Today’s Research – April 24, 2012Baja Mining Corp. (BAJ-T, $0.57)SECTOR OUTPERFORM; Revised Target: (-$0.90) $0.85; Risk: SPECULATIVEStefan Ioannou, PhD, sioannou (at) haywood.comEvan Young, MS, DIC, eyoung (at) haywood.com‘Surprise’ – US$246M Capital-Cost Increase at El Boleo— Baja recently announced a US$246M initial capital-cost increase at its flagship 70% owned El Boleo copper-cobalt-zinc project located in Mexico. The estimated increase is in addition to the project’s US$100M cost overrun facilities and 12% (US$92M) contingency. Furthermore, four Directors have resigned from the Company’s Board within the past week, adding uncertainty to the Baja story.— We had anticipated modest capital-cost escalation as per Company guidance on a recent analyst tour of El Boleo. However, the magnitude of the increase, unfortunately not acknowledged/recognized by Baja’s management during the site visit, is unexpected. The Company has initiated discussions with its lending syndicate to develop an acceptable solution within the next 2 months to allow continued drawdown of El Boleo’s debt funding. We note our model remains based on H2/13 copper production start-up at the project, versus Baja’s H1/13 target—a timeline that we will continue to monitor closely, especially now in light of the Company’s potentially limited access to funds.— The resignations of four Directors within a week do not instill market confidence in Baja, especially on the back of a recently completed proxy battle unsuccessfully headed by Mount Kellett Capital Management LP, the Company’s largest single shareholder (19.8%), which raised a number of questions pertaining to, among other things, Baja’s corporate governance practices. We view this recent Board activity as an additional element of risk and uncertainty.
1) Company head John Greenslade is now (or nowabouts) on a plane heading to South Korea. He'll come back in a few days. He'll then "be resigned" next week.
2) Here's a paste out of Haywood's call on the stock, this morning.
IKN back with a disclosure: No position in BAJ.to and that won't change