a few thoughts

Intrepid Mines currently owns 80% of the project with the remaining 20% already in Indonesian hands. Therefore, there is only another 31% of the project at issue and any divestiture is a long way in to the future. As proposed by the new regulations, the divesture is to occur in stages 5 years after the start of production. So for the large porphyry copper/gold deposit, we are talking about something that is likely 10 – 15 years in to the future.

The government has made it clear that any divestment under this proposal is to be transacted at “fair value”. As an example, Newmont recently sold down its interest in its large Batu Hijau Gold/Copper Mine in Indonesia for US$220 million which was close to its NPV.

So we are really talking about selling a 30% interest well in to the future at a fair market value. It is also likely that there will be some tempering of these regulations in time and industry is lobbying the government in this regard.

There are now at least 5 known porphyries on the property. The drilling of only part of the first one has already yielded an inferred resource of 1.7 Billion tonnes containing 25 million ounces of gold and 15 billion pounds of copper. Tujuh Bukit remains of the world’s largest undeveloped copper/gold systems that is not controlled by a major mining company.

Intrepid Mines currently has 12 drill rigs operating on the project conducting in-fill drilling on the gold oxide project, which will lead to a pre-feasibility study. They are also conducting drilling to expand the copper porphyry resource, which will lead to a scoping study on that project later this year. This will be the first assessment of the economics of that world class resource.

In any event it was highly likely that Intrepid Mines would have contemplated some divestment in order to fund this multi-billion dollar project’s capital cost. And the government of Indonesia has said that a public float would be an acceptable form to achieve divestment.

At the current share price Intrepid is trading at an enterprise value (approx. $240 million) that is less than the after tax NPV(10%) = $446 million of just the gold oxide using a gold price of US$1,450 per ounce according to the April 20th, 2011 Preliminary Economic Assessment. (That is to say we get the interest in the 25 million ounce + 15 billion pound copper porphyry for less than free!)

Intrepid Mines is well funded with cash on hand of approximately $148 million (28 cents a share) which provides ample funding for the contemplated work programs.

My concern is that an opportunistic senior mining company will use this share price weakness during this time to make a hostile bid before Intrepid can fully determine the value of this world class project.