Ann: Boseto Commissioning Update, September 2012 , page-5

re: Ann: Boseto Commissioning Update, Septemb... Good day today. Good ann, all in all seems to be ramping up as expected.

Found this report (Proactive Investors UK) thought I should share - think it's a good summary. They've got a target of $1.37.

http://www.proactiveinvestors.co.uk/columns/fairfax-i-s/10564/fairfax-marketing-report-including-african-minerals-discovery-metals-solgold-stellar-diamonds-and-others-10564.html

* * * * * * *


Discovery Metals (ASX:DML) – commissioning goes well at Boseto

Target A$1.37 (June year-end)

• Discovery Metals today report good progress on the commissioning of its Boseto copper mine in Botswana.

• 2,500to of copper-silver concentrate was produced in August rising from 1,440 in July in early commissioning.

• The team expect to produce 4,000t of copper-silver concentrate

• The milling circuit is now running at 75% of design throughput with production expected to rise further towards throughput design through September. The crushing and milling circuit processed >190,000t through August in line with the commissioning plan. The team expect throughput to rise towards 250,000tpm capacity.

• 180,000t of ore were produced from the open pit at Zeta from 150,000t in July.

• Mining is now into the first sulphide ores and this should raise plant recoveries towards target levels. The proportion of sulphide ore will increase with depth as the pit passes through the lower recovery oxide and transitional ores.

• Concentrate grade is already at a highly desirable 41% copper content with an additional 650g/t of silver contained per tonne. Work is ongoing to optimise recoveries and concentrate grades.

• A third 350t excavator was commissioned in mid-August increasing the mine capacity.

• Management expect the operations to be cash flow positive after all costs but excluding capital through September.

• Production should to a rate of 36,000tpa of copper in concentrate and 1.1moz of silver

• Further expansion towards 55,000tpa of copper in concentrate may be possible with the addition of new ore reserves.

• A new 24-36MW coal fired power station is being planned to potentially reduce power costs to around 8c/KWh saving more than $1m per month in as well as bringing greater power diversity and reliability to the operations.

• Cash costs of A$1.23/lb are envisaged on 36,000tpa copper production. This ranks close to the industry average C1 cost of production.

• Valuation: We have adjusted our valuation and target price to account for the issue of 41.6m new shares at A$1.20/s to raise A$50m on 9th August in Australia. We also apply a 10% discount to our valuation to account for market uncertainty.

• Discovery Metals have hedged 40,000t of copper production at good price levels over $8,000/t. This protects the price on US$420m of sales running till 2015.

Conclusion: Discovery Metals appear on track to meet target production throughput levels this month. Revenues are boosted by the hedge book which runs at over $9,000/t for this year’s production. Potential to raise production rates could add significant value in terms of cash flow and market rating.