Upgrades but Altona not smelling the Roseby

Altona Mining (AOH) upgraded its full year guidance and delivered a solid first half result today, but that may not be enough to break the shackles capping the junior copper miner’s advance.

Altona increased its full year copper production guidance to between 9,000 and 10,000 tonnes and its gold forecast to between 9,000 and 10,000 ounces as sales for the first half surged 40% to $42.6 million.

The news will likely prompt analysts to upgrade their earnings forecast for Altona, as the miner’s original guidance was for 8,000 to 8,800 tonnes of copper and 8,400 to 9,200 ounces of gold from its Finnish Outokumpu mine.

Further, Altona’s pre-tax profit of $12.4 million for the six months to end December represents nearly 80% of what brokers are expecting the miner to deliver for the full year. Outokumpu is the company’s only mineral producing asset.

While the stock climbed 2.9%, or 0.5 cents, to 17.5 cents, it is still stuck in the 16.5 cents to 18 cents trading band that has range-bound the stock since the start of the calendar year.

Perhaps the better-than-expected result is largely in the price as management has a good track record of under-promising and over-delivering.

What is the more important performance driver is Altona’s Roseby project in Queensland. Outokumpu is a great little earner, but Roseby is the main game as it is far bigger and has the potential to produce in excess of 40,000 tonnes a year of copper.

The problem is finding the funds to take Roseby into production. Xstrata declined to exercise its option to buy a 51% stake in the project a year ago, and Altona has been unable to find another deep-pocket partner since.

The best Altona could do was to strike a joint-venture with another mining junior, Chinalco Yunnan Copper Resources (CYU), to explore south of Roseby.

Chinalco Yunnan Copper is majority owned by large Chinese corporations, so one can’t discount the chance that Altona will manage to secure the funds to bring Roseby to life. But until the future of Roseby is secured, don’t count on the Altona being significantly re-rated.