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.
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]