UPDATE: Sterne Agee Initiates Prospect Global Resource at Buy with $5 PT

Sterne Agee initiated its coverage on Prospect Global Resource PGRX with a Buy rating and a price target of $5 a share based on current valuation. Sterne Agee said, "[W]e feel the stock's current valuation justifies the significant risk involved in investment in a development-stage mining company. … Based in part on the work done and assumptions used by Tetra Tech in its Preliminary Economic Assessment, we estimate that PGRX can generate EBITDA of $525MM in its first year of production and hit a run rate of $563MM in year two. Our $5 target assumes a multiple on 2016E EBITDA of 4.3x (discounted for three years), which represents a discount of nearly 50% to the five-year average of our comp group of production-stage potash companies." Prospect Global Resource closed at $2.40 on Thursday.