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11/9/11

Minefinders (MFN) (MFL.to): Well blow me down, a Canadian brokerage anal yst shows a bit of backbone

Kudos and a round of IKN applause goes out to Brian Quast of CIBC, who today downgraded Minefinders (MFN) (MFL.to) and dropped the house target from $19 to $16...damned good to see one of you guys with a bit of gumption for a change. Here's how Quast lays out his call and if you want to read the whole thing, click here and download your own copy of the PDF:

  • As of Nov. 8, we are downgrading MFL from SP to SU and reducing our PT from C$19 to C$16 due to the recent announcement for the proposed mill at Dolores. We believe the mill size of +6,500 tpd is too large for the deposit, which ultimately results in a lower NAV and increases execution risk.
  • A formal technical report was not released with the announcement. Instead, our estimates have been cobbled together through previously released data and discussions in the conference call. Given the plethora of uncertainties, we believe there are considerable downside risks to our valuation.
  • While the mill still gives MFL production growth, we see this as lower-quality growth compared to our prior assumptions and are lowering our target CF multiple from 6.5x to 5.5x. Furthermore, we see at least 6% dilution to shareholders in the near-term due to the maturing convertible notes.
  • MFL reported Q3 adjusted earnings of $0.21/sh, essentially in line with our estimate of $0.22/sh and consensus of $0.21/sh. Production of 16K oz. gold and 692K oz. silver was pre-released. Guidance of 65K - 70K oz. gold and 3.3M - 3.5M oz silver was reaffirmed.

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