Salman Partners: Metals Morning Note- SouthGobi Resources

Salman Partners(Editorial) reports on SouthGobi Resources Ltd (TSX:SGQ) projects which include highway construction contract and investment in Aspire Mining .

The editorial is quoted as saying:

Both of these projects can be fully funded with SouthGobi’s cash on hand, which totaled US$744M at the end of June (following the US$437M (gross) equity financing in January), and we estimate a current cash balance of about US$700M. While the Aspire purchase is not expected to have a material impact on our NAV for SouthGobi at this stage, it appears to be a favourable opportunity for the company to contribute to, and participate in, the development of another coal project in Mongolia. We intend to incorporate the purchase into our forecasts for SouthGobi once the transaction has been formally approved.
We currently have a BUY recommendation on SouthGobi with a 12-month target of Cdn$18.50 per share, based on the NAV of our discounted FCF estimates for the company’s principal projects.

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