CAML: Second time's the charm; Upgrade to Sector Perform

Research evidence excerpt

CAML: Second time's the charm; Upgrade to Sector Perform

existing 900ktpa processing plant on site. On RBC NAVPS and DPS in GBp

price forecasts, assuming 30% cost and capex inflation vs the 2022 PEA and All market data in GBp; all financial data in USD; dividends paid in GBp. Priced as of prior trading day's market close, EST (unless otherwise noted).

first production in 2031, we calculate a 0.8x P/NAV takeover multiple in

line with precedent takeover multiples for copper developers of 0.8x. The

transaction is scheduled to close in September. CAML has learnt from past

mistakes by securing 29% major shareholder approval and also holds a call

option to acquire up to 9.9% of Cygnus shares in the event a competing

proposal emerges.

and what we are less excited about

On the other hand, the deal comes with 30% dilution and no near-

term earnings contribution, with first production unlikely before 2031.

Permitting requires meaningful First Nations engagement, introducing

timeline risk. After a five-year search, the "transformational" third asset

comes in at PEA/PFS stage, earlier on the development curve than we have

hoped. That said, with junior copper valuations where they are, the pool

of accretive acquisition targets is shallow, and this deal likely represents

the most compelling option available in the current market. Near-term

production and earnings remains essentially unchanged albeit we think the

door remains open for potential bolt-on acquisitions in Kazakhstan.

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The Cygnus deal, whatever its limitations, removes the M&A uncertainty

that has weighed on the stock and gives CAML a credible answer to the

growth question - even if that answer is a few years away. At current