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Aug 2004 - Minotaur Resources

Minotaur Resources Ltd (MNR) –Prominent Hill Now in Oxiana’s Production Schedule for Commissioning in late 2007 / early 2008

  • Oxiana Limited (OXR) gave a detailed presentation (which we attended) in Adelaide on 26 August 2004, on their expectations for MNR’s Prominent Hill initially averaging 90,000tpa copper and 110,000ozpa gold from 2008, and its inclusion within OXR’s production schedule on the basis of owning 100% of it.
  • OXR envisage completing an infill drilling programme/pre-feasibility study at a cost of $5m within 9 months to June 2005, earning them 35% of Prominent Hill. Followed by spending $25.5m (to earn 65%) during an up to 12 month full feasibility study and then 18-month construction period leading into 7.5mtpa open-cut production for up to 5 years from late 2007 / early 2008.
  • The estimated capex of A$350m does not include the potential 200,000oz (or more) gold halo surrounding, and gold mineralisation east of, the copper-gold orebody, which could reduce the outlay by at least $50m, pay for the 100m to 120m pre-strip and result in gold production during 2007. The capex may also be reduced by SA Government concessions and/or offtake agreements from China or elsewhere.
  • MNR’s share price has risen close to the conceptual value of $1.65/share that was based on capex of $200m in ERA’s October 2003 report. The usual “rule of thumb” for a project’s approval is to at least achieve the required capex as the NPV (at 10% or 12% and being in Australia, there is no political risk). Consequently, capex of $350m infers that MNR’s market cap has a minimum capability of $123m or $2.35 per share, implying that it could trade between $1.50 and $2.10 per share.
  • The inclusion by OXR of 100% of Prominent Hill in its new forecasts (it was included at 65% in OXR’s presentations around 5 August 2004) does enable OXR to achieve its stated 5-year targets of producing 200,000tpa of copper and 500,000ozpa in gold, and could infer that at some stage OXR may make a takeover bid for MNR. Such a bid could occur by May 2005 ahead of completion of the prefeasibility study, and possibly be in the form of scrip or scrip and cash.
  • Written by: Keith Goode
  • Tuesday, 31 August 2004

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