Costs and potential profits - the numbers crunched.

Hi all. Timboz here and new to forum. I have a sizeable holding recently bought at $1.37 and am happy to hold. Here are my thoughts on the numbers.

They will high grade (as publicly stated) ie blend of high and low grade ore (no sub grade). As it stands:

Tonnage 1. Grade Recovery 1.

Cu 1627210 x 0.0154 1. x 0.95 = 23806 tonnes @ A$7000/tonne = A$166 643 000

Co 1627210 x 0.000467 2. x 0.90 = 760 tonnes @A$45675/tonne 3.4. = A$34 713 000

Au 1627210 x 0.21g/tonne x 0.75 = 341 714g

341 714g/31.1g/troy oz = 10987 oz @ A$1500/oz = A$16 480 000

Fe 1627210 x 0.0477 2. x 0.75 = 58213 tonnes @ A$100/tonne 5. = A$5 213 000

A$ 223 049 000


A$ 223 049 000/1627210 tonnes = A$137.07/tonne ore

Cu eq grade = A$137.07/ A$7000/tonne

= 0.01958 = 1.958%* * based on global credit element content so understates true value as gold
and cobalt increase with copper.

Costs 2. Mine and process = $28.91/tonne** but use $32/tonne (conservative)
A$32/A$137.07 x A$7000/tonne = A$1634/tonne

** Mining cost "includes drill and blast, operators, including housing and super, site admin costs,
corporate admin costs, geology and survey, fuel, repair and maintenance, insurances, and
depreciation and amortisation" 6.

It would seem safe to assume that process costs are also fully accounted as above ( imo).

Ex mine costs (taken from Oz minerals report to be conservative as shipped from Adelaide vs
Townsville but mine to port logistics almost identical)

Concentrate load and transport A$157/tonne @30% = A$475
Concentrate sea freight A$81/tonne @30% = A$270
Concentrate smelting A$114/tonne @30% = A$380
Copper refining A$252/tonne @100%=A$252

= A$1377/tonne ex mine costs

Total mine, process, transport, smelt and refine = A$1634 + A$1377

= A$ 3011/tonne


= A$ 3989/tonne margin

Gross profit = A$3989 x 1627210 x 0.01958 = A$ 127 093 000 from existing high + low
stockpile.


Now I am no accountant but it would seem that the only outstanding costs are debt servicing which I take as US$108 million @ 7% to be repaid by around April 2017 = US$127.9 million
= A$182 million @A$0.7/US$

This seems serviceable even without re-structuring the debt payment schedule and the project economics seem very robust.

I do understand commissioning problems can and do occur but there is a lot of slack there and I have been very conservative in the calculations eg There is no mining cost for the stockpiled ore and the native copper will not incur anywhere near the processing and ex-mine costs that concentrate will. Additionally I fully concur with the comments of Shadowboxer re nuggett effect and RAB grade control samples (upside will occur here).

SOURCES.

1. Nov 2013 JORC Measured & Indicated
2. "Moving Forward" ASX release
3. US$14.5/lb (current price)
4. No sulphur credit included
5. Magnetite attracts a US$20 premium to haematite ore = US$70/tonne = A$100/tonne and probably considerably more as in short supply in Australia and used for washing coal.
6. p21 Quarterly Report 30th Sept 2013.

I fully expect to be howled down by some but remember I'm new, have no history here and am reporting on current and published numbers subject to audit.