Assuming Panama FM referendum passes on Dec 17 where do you see company and share price going from here?....what would you expect the fair share price to be, currently at $9.90? Is there any value at all to capture here? Does the company go bankrupt?
Thx
jim
We think the market has effectively now written off the mine, so any good news at all would have an amplified positive effect on the stock. But we doubt an agreement is going to be reached. FM is likely going to breach some debt covenants, but it is not in creditors' interest to force anything on the company. It has other assets, and has lots of short term liquidity. We would not expect bankruptcy here, though financial risks have indeed increased, and creditors can be difficult at times. There is still a question of environmental costs in Panama, and whether FM can capture any damages from the government. Fair value is likely $8 to $12, assuming no other negative news. That being said, the mine accounted for about 5% of world copper production. Copper potential goes into a global supply deficit, from a surplus, with any economic strength. Thus, FM's other assets might see some benefit even from its disaster in Panama.