trading pick of the day

Trading Pick of the Day

05 September 2005

OXR: More Copper, More Attractive
Shares in Oxiana (OXR) rallied strongly on Friday after management outlined an initial inferred copper resource at the Thengkham North prospect at Sepon. This is the prospect that returned the spectacular copper grades (20m @ 20% copper) from supergene mineralised intercepts in March this year.

More copper. The initial resource is 29.4mt at 1.5% copper for 429kt contained copper (0.5% Cu cut-off). At a 1% Cu cut-off, the narrower envelope comprises 11.4mt at 2.7% copper for 309kt contained copper. Significant molybdenum ranging from 400-500ppm is also present in the copper resource and metallurgical testwork to ascertain its amenability to process recovery has begun.

More attractive? The Thengkham North deposit grades are around 15% higher than the previously defined Thengkham South prospect. Given the presence of various copper carbonates and copper oxides in the Thengkham North mineralisation, Macquarie Research Equities (MRE) believes that the more likely initial treatment scenario would be a heap leach operation followed by processing through the existing SX-EW plant. This differs from the Thengkham South deposit, which appears more suited to flotation and copper concentrate production.

Expansion talk building. OXR has commenced feasibility work into alternatives for expanding the Sepon copper operation from its currently rated capacity of ~60ktpa copper to an initial target of around 120ktpa copper by 2009. Various processing options are to be investigated, including expansion of the existing SX-EW plant and the addition of new processing facilities. The Sepon copper operation continues to ramp-up on track and OXR confirmed that its targets remain 30kt copper in 2005 and 60kt copper in 2006.

Maintain outperform recommendation. OXR has begun to talk positively about the potential copper expansion that MRE have been expecting for some time. Progressive delineation of the resource at Thengkham North adds to the copper resource bases already established at Khanong and Thengkham South and provides OXR with the requisite mining inventory to undertake such an expansion.

OXR remains MRE preferred large base and precious metals producer. Its impressive growth pipeline (Sepon gold expansion, Sepon copper expansion, Prominent Hill development and Golden Grove exploration) should see OXR transform into a +500koz gold and +200kt copper producer over the next three to four years.