Panoramic Resources Limited (PAN) –Significantly reducing costs and capex by up to $40mpa while growing beyond 20,000tpaNi

• In some ways, the lower nickel price has been beneficial to Panoramic, because it caused the company to have a complete review of its cost and capex expectations for 2008/9. Combined with the across the board 10% reduction in all employees’ salaries, Panoramic encouraged its contractors to do the same, which has resulted in reductions of A$1m-$2m per month on each mine (totalling ~$40mpa).
• Panoramic’s 20,000tpaNi target may be achieved in the coming year. PAN’s forecast is up to 19,000tNi, but it really depends on what average grades come from the keel zone of Lanfranchi’s Deacon as individual grades there range up to ~11%Ni. In fact if Deacon averages ~4%Ni in one of the months in mid-2010, Lanfranchi could be producing at an annualised rate of 20,000tpaNi for that month.
• The ~50,000tNi resource delineation of the Lower Orebody at Savannah has extended the mine life to at least 10 years based on treating 700,000tpa (~70m vertical per year) at 1.3% to 1.4%Ni for ~8,000tpa Ni (with material copper and cobalt credits). That takes PAN’s production beyond 20,000tpaNi from mid-2011.
• Savannah appears to have been sub-horizontally injected & hence horizontally domained, so its orebody changes with depth as in the latest drillhole intersection in the Deeps covering ~10m of Ni mineralisation including ~3.3m of solid massive (Kambalda-looking) nickel ore grading an ERA expected ~ >= 2% to 3%Ni.
• Aside from Savannah’s nickel production increasing due to higher nickel grades at depth, its production could increase by ~10% to >750,000tpa following the expected receipt of 2 spare 50t trucks from Lanfranchi (surplus due to the new six-wheeled 60t trucks), and the planned purchase of a new 60t truck for Savannah.
• The nickel and A$/US$ exchange rate hedging undertaken by PAN has been extremely astute, resulting in significantly higher cashflows to PAN, such as the recent (MQ09) US$70m puts at US$73c paid for with US$70m calls at US$56c.