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CIBC Downgrades Banro (BAA) to 'Sector Performer' on Instability In Northeastern DRC

 November 21, 2012 02:20 PM

(By Balachander) CIBC World Markets Inc. downgraded its rating on shares of Banro Corp. (NYSEAMEX: BAA) (TSX: BAA) to "sector performer" from "sector outperformer" and reduced its price target to C$4.75 from C$6.00, citing instability in the Northeastern Democratic Republic of the Congo (DRC).

Media sources have indicated that the rebel group M23 has seized control of parts of the city of Goma, which is the capital of the North Kivu province, CIBC noted. Those sources have also indicated that the rebels could also be pushing forward along the road to Bukavu, which is the capital of South Kivu.

[Related -Banro (BAA) Estimates Cut By CIBC After Operational Update, 'Sector Outperformer' Maintained]

"Our key concern relates to mine supplies, understanding that Bukavu is a key point along the transportation route," CICB said. "This is certainly not an ideal time for any kind of supply interruption given the teething issues at Twangiza. We believe this could impact Twangiza's ability to reduce costs."

Given continued instability in the region, CIBC is downgrading Banro.

CIBC increased its discount rates for Twangiza and Namoya to 12 percent from 5 percent.

Toronto, Canada-based Banro is engaged in the exploration and development of gold properties in the DRC. The company holds 100 percent interest in four gold properties, such as Twangiza, Namoya, Lugushwa, and Kamituga.

Shares fell 2.27 percent to trade at $3.01 on the NYSEAMEX. On the Toronto Stock Exchange, the stock shed 2.61 percent on Wednesday.

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