According to KGHM’s CEO Herbert Wirth, the company is close to acquiring a Latin America-based copper mine. The CEO added that the company hopes the transaction will be completed before the year-end. This is why (171,8 PLN, -0,12%) revised its earlier plans and decided to boost this year's investment spending by 20% to almost PLN 11bn. The Polish company is still looking for other acquisition targets, searching for copper deposits in the European region of the Mediterranean Sea, Scandinavia and Portugal.
Our view:
We are in wait-and-see mode in terms of assessing the outcome of any new acquisition by . The price of copper fell only 4% m/m in August and is still hovering above US$ 9,000/t, which implies cannot count on any significant bargain-basement deals during its M&A activities in Latin America. In general the move to increase own production capacities seems right to us as long as the conducted investment process would have a positive NPV which could not be the case if overpays for the project or the project is in politically unstable location.
[Buy, Fair Value 212.20 PLN]