Puthep could be low-cost project tooBy Michael Quinn, 28 July...

Puthep could be low-cost project too
By Michael Quinn, 28 July 2008
MINE number two isn’t likely to be anywhere near as cheap as its first operation, but the fact that a second operation is now on the horizon gives credence to the aggressive growth ambitions of Lao copper-gold miner PanAust.
A large resource increase at Puthep in Thailand (now 183 million tonnes grading 0.5% copper and 0.13gpt gold at a 0.3% copper cut-off) has the analyst team at Credit Suisse assessing development as shaping as a “reality”, with a feasibility study for a potential 50,000tpa copper producer set to be completed mid-2009.
However, it won’t come as cheap as the new Phu Kham mine in Laos.
Phu Kham mine cost less than $US241 million to develop and is expected to produce 60,000t of copper in its first full year of production in 2009 (as well as 60,000 ounces of gold and 600,000oz of silver). Roughly measured that equates to capital intensity per annual tonne of production of $US4000, less than half the $US10,000 seen these days as an average. Copper Mountain Mining Corp, for example, this week announced that its namesake 45,000tpa copper project in British Columbia would be developed at an estimated cost of more than $US400 million.
However, PanAust’s general manager corporate development Joe Walsh expects Puthep to come in under the sector average on account of nearby infrastructure, in particular power, roads and a regional population centre. He also said water, another key input, wasn’t likely to pose any challenges given the typically high rainfall. Other positives include the shallow mineralisation, low strip ratio and a significant amount of material that will be free dig or require little blasting.
Asked about challenges, Walsh was unsure on the timing of required permitting. Still, he was hopeful given the recent approvals finally achieved this month by Kingsgate Consolidated.
PanAust will earn a 51% interest in Puthep upon completing a feasibility study on the PUT 1 deposit and has further options to acquire a total 60-70% interest.
Under the provisions of the Thailand-Australia Free Trade Agreement, Australian companies can own 60% of a Thai mining company, and can own an interest above 60% with government approval.
PanAust has ambitions to be a 150,000tpa copper producer by 2010. Aside from Puthep, the company is aiming to have completed an expansion at Phu Kham, lifting annual throughput to 16 million tonnes and production to 300,000t of concentrate containing 75,000t of copper, 65,000oz of gold and 600,000oz of silver. At these full-year production rates, PanAust forecasts that indicative annual pre-tax cash flow from Phu Kham could be $US315 million in 2009 rising to $US395 million in 2010 based on a copper price of $US3.50/lb, a gold price of $US850/oz and a silver price of $US14/oz.
While copper remains a focus, the company stated it was open to other opportunities.
PanAust was capitalised this week at $A1.1 billion, with an exploration and evaluation budget in 2008 of $US30 million.