far east report

CMR has title to the historical Rum Jungle leases containing the Mt Fitch uranium
mineralisation in carbonate rich and breccia rocks with a 100m thick central zone that thins on
the extremities. Elsewhere on the leases, the Kylie prospect has been giving positive signs for
unconformity style mineralisation.
On 19 March 2007, CMR stated that a 2 mtpa operation at Mt Fitch gave a NPV of $276m at
US$90/lb, based on a preliminary scoping study. In the Chairman’s address at the 2007 AGM,
CMR predicted annual revenue of $116m and a NPV of $68m at a uranium price of US$60/lb,
and $219m p.a. and NPV of $429m at US$113/lb. Uranium production would be in the order
of 2,200 tpa. There has been almost nothing said of the uranium project since then, probably
due to the focus on developing the Browns Oxide lead and cobalt project. The Annual
Accounts, released in March 2008, did say that Hellman Schofield was re-estimating the
uranium resource.
Elsewhere, CMR has stated that its key project, the oxide base metals operation, is due for
commissioning in May 2008.
Investment Perspective: CMR has been noticeably quite on its plans for the uranium side of
its business. Back in March 2007, it released some broad numbers – too broad to be able to
build any meaningful analysis. We have not changed any of our numbers from the ones used in
the previous research; capex $150-200m, 2 mtpa, cash costs US37/lb, grades 360-460 ppm
There has also been no further news on the proposed spin-out of the uranium assets. Has the
Company gone cold on this idea?
CMR shares have been amongst the worst performers in the market even though the numbers
suggested by the Company the shares look very good value, selling on a cash generation
multiple of less than 2x – and that is ignoring any earnings from Browns! There was a time a
few months back when there were fears of cost blow-out and delays, but with the Browns
project due to commission in May, we are about to see the litmus test. The performance of this
project will have a greater short-term impact than its uranium interests. Given the high cobalt
price we might see a much stronger share price if commissioning goes well