re: Ann: Little Eva Definitive Feasibility St... I earlier made...

re: Ann: Little Eva Definitive Feasibility St... I earlier made a throw away comment about giving away Roseby (referring to Little Eva).

I considered the following factors in making that comment:

1. The company's headline NPV in the updated DFS of $346m is pre tax. I am using the post-tax NPV which would be around $240m.
2. Would anyone pay $240m for the project? No. The discount rate used in the DFS is 7.5%. A bidder would use a much higher discount rate to achieve a required rate of return on investment. The low discount rate of around 7-8% seems prevalent in many mining feasibility studies. But this does not represent a required rate of return for investors. For example BHP's ROE average over the last 5 years was about 20%. This of course factors in gearing but I would assume they wouldn't look at any projects achieving less than 15% after tax annually. Nor would any other miner.
3. They used cu price of $3.20 and $A at 0.85 in the first few years in the DFS. This does not reflect the current market. Look at what a 10% change in the $A price of cu would do in the sensitivity analysis.

4. In the latest DFS update the capex is revised downwards by $26m to $294m... is this sustainable given the capex blowout in Outokumpu. Estimates are estimates... in most cases - capex exceed forecasts... and most investors don't know because it is not a line item in the P&L.

5. In the unlikely event of the coy going ahead with the project on its own, they have to raise $300m, equity would be diluted by 2b shares (based on current sp), or 1b if half equity half debt/partnership. Also interest expense to be considered in the latter case.

Its over a year since xstrata decided not to exercise the option and they have neither found a partner nor an outright sale. How much more time and overheads will be spent on maintaining this project?

I would rather give it away... but $50m would be a bonus!