pog holding steady at 1370, page-6

Shaw article in full:

Key Points
Hudson Minerals Takeover of Noresmont Mining Valuation implication for
IAU.
Intrepid Mines [IAU]
Recommendation : BUY
Price Target $3.00
Last night in Canada, Hudbay Minerals Inc [HBM.TSE] made an offer for all the
shares in Norsemont Mining Inc [NOM.TSE], valuing Norsemont on a fully
diluted basis at US$520m. Directors of Norsemont have accepted the bid.
Norsemont owns 100% of the Constancia copper-molybdenum-silver property
in Peru with a current mineral reserve and resource of 441.3Mt grading 0.42%
copper with little or no gold credits [4.09bn lbs of copper]. The Constancia
deposit is close to existing infrastructure and other existing mines [Las
Bambas, 1,320Mt @ 0.77% CuEq, Haquira 420Mt @ 0.66% CuEq and Tintya
720Mt @ 0.56% CuEq].
The takeover values copper in the ground at 12.7c/lb, remembering there is
little gold attached to this deposit. Jinchuan's takeover of Continental back in
September 2010 was struck at 17.6c/lb of copper equivalent. We believe that
the Continental takeover price in the ground is far more a realistic parameter to
judge Intrepid as its deposit graded 0.43% Cu and 0.61g/t Au.
Implications for Intrepid Mines
Intrepid is capitalised at US$950m with US$100m in cash [EV = US$850m].
Stated resource of 500Mt @ 0.5% Cu and 0.5g/t Au [mainly porphyry] = 3.75M
tonnes of copper equivalent.
Open Cut ~3.0M ounces of gold =0.45M tonnes of copper equivalent.
Recent drilling is estimated to have increased the size of the main porphyry by
120M tonnes at similar grades.
This would be equivalent to an additional = 0.9M tonnes of copper equivalent.
Total = 5.1M tonnes of copper equivalent [Intrepid 80%].
At the Norsemont takeover price [conservative] this implies a valuation for Intrepid of US$1.2bn
[40% premium to current EV of IAU].
At the Continental takeover price equivalent this implies a valuation for Intrepid of US$1.58bn
[85% premium to current EV of IAU].
Intrepid has identified an additional 2 porphyry deposits on the ground.
Drilling over the last 2 months is expected to highlight additional copper/gold resources at the
Tujuh Bukit deposit of Intrepid.
Recommendation
Takeover activity over the last 12-18 months for copper/gold deposits has highlighted two things.
Firstly, premiums are being paid for targets with both copper and gold. Secondly, prices paid are
being stepped up over this period, starting at US5c/lb in the ground [Zijin Mining for Indophil] to
US17.6c/lb [Jinchuan for Continental]. Acute shortages of copper of the next 2-3 years could very
well see prices paid for high grade copper equivalent in the ground move to beyond US20c/lb.
With a massive exploration programme continuing at Tujuh Bukit by Intrepid we maintain our price
target at $3.00.