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Tagged with: Minotaur Resources

Oct 2003 - Minotaur Resources

Minotaur Resources Ltd (MNR) – Bringing Prominent Hill into Production possibly by 2006

  • After acquiring 100% of the Mt Woods Joint Venture areas, MNR has farmed out the area to Oxiana Resources (OXR) such that OXR can acquire a 65% interest in the tenements that contains the Prominent Hill copper-gold discovery for $34m. The staged farm-in includes an initial $3.5m for infill drilling to result in a resource, followed by a $5m pre-feasibility, and then full feasibility study, which could result in Prominent Hill being in production by the end of 2006.
  • The effective Strategic Alliance between MNR and OXR is a good “combination”, leaving MNR to focus on exploration with OXR taking over the mining aspects of Prominent Hill assuming that it is viable to some degree.
  • The haematite breccia zone of the orebody appears to be consistently mineralised, for the northernmost limb, and a mineralised block can be estimated as containing about 70mt (our figures) (based on a conceptual block about 120m wide by 350m high by 1000m long) that allows for possibly a 30% reduction due to an apparent plunging grade distribution and assumes ~70% of the resource may be mineable.
  • At this stage, it is too early to estimate grades and model MNR until the resource has been determined after the infill drilling. Possibly, Prominent Hill could be a selective 1mtpa to 2mtpa producer initially mining higher grade >2.5%Cu-equiv areas, which were observed in the detailed drillhole 1m sampling as in DP005’s intersection of 209m @ 1.54%Cu & 0.9g/tAu including lengths of 7m to 8m at about3.0%Cu & 4.5g/t Au.
  • However, its actual throughput rate, be it 3mtpa sub-level open-stoping method or capex of ~A$200m depends on the feasibility study. A mine life of 20 to 25 years conceptually appears to be achievable and probably the target of the OXR farm-in.

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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.

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Dec 2004 - Minotaur Resources

Minotaur Resources Ltd (MNR) – Just How Much Is MNR Worth ?

  • This report determines a potential value for MNR of A$2.70/share according to perhaps its base case worst scenario. Applying seemingly realistic copper price sensitivities soon enhances the underlying value to beyond A$3.00 per MNR share.
  • On 9 November 2004, Oxiana Limited (OXR) announced that it had reached an agreement to takeover MNR by a “scheme of arrangement” in which MNR shareholders would receive 1.85 OXR shares –for- 1 MNR share (representing the Prominent Hill assets and liabilities), and 1 MinEx (Minotaur Exploration share, representing the rest of Minotaur, at an estimated IPO of 40c/share)
  • Although we do recommend that MNR shareholders vote in favour of OXR’s offer when it occurs on its expected date in January 2005, it does beg the question as to what MNR is actually worth through OXR and MNR’s remaining assets. ( Note : We have never been commissioned to visit OXR’s operations. Consequently this report is based mainly on presentations, ASX releases, a visit to Pan Australian in Laos, and general knowledge).
  • MNR has been ascribed a value of A$2.29 per share in the OXR merger offer based on A$1.89 for OXR at about A$1.02 per share and 40c for MNR Exploration. However, our analysis infers that very little if anything has been included for Prominent Hill and instead the value appears to be closer to A$2.70/share.
  • OXR is a growth story, which MNR shareholders can access effectively from the first day of Sepon’s new copper production building up to 60,000tpa Cu at cash costs ~US$0.37/lb and a gold expansion to 230,000ozpa at cash costs of ~US$180/oz. Excluding Prominent Hill, OXR has 5-year targets of 400,000ozpa gold and 100,000tpa copper which appear to be attainable. Hence valuing OXR at A$1.02/share just on its Sepon assets appears to be conservative, especially if copper prices >US$1.10/lb are achieved.
  • Minotaur Exploration’s ascribed 40c (actually 42c) value is based mainly on its investment holdings in Mithril and Petratherm, plus the cash to be raised and net cash left within the company, hence valuing the exploration assets at a cost of only A$2.5m. Given the scope and expenditure being incurred on these numerous exploration properties, this appears to be very conservative.

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