Thanks SP a great read, this is life changing stuff if you can get a good sized position before the TSX listing and the explosion in earnings leading up to 2010.
A FLOUNDERING non-entity. That is how Tamaya Resources executive chairman Hugh Callaghan described the state of the ASX-listed company on his arrival in June 2006 with a brief for rapid change. Mr Callaghan’s overhaul of the former sleepy Chilean copper producer is not yet finished. But at least the former Rio Tinto and Xstrata executive can now statewith confidence that Tamaya is a copper and gold company going places.
Under Mr Callaghan’s new rule, Tamaya has established an exploration, development and acquisition pathway that positions the group to be operating four mines by 2010, with a pipeline of further growth opportunities also established. Mr Callaghan reckons that the group’s four-mine portfolio will be capable of generating annual revenue of US$450 million. Assuming copper prices of US$3/lb, gold at US$670/ oz and a US dollar exchange rate of A$0.80, that translates in to earnings before interest, tax and depreciation/ amortisation (EBITDA) of more than A$250 million. That is not far off from Tamaya’s current market capitalisation of A$307 million (at A$0.29/share) and explains Mr Callaghan’s enthusiasm for the group’s near-term growth prospects. The earnings capacity also helps meet Mr Callaghan’s insistence that Tamaya’s growth not come at the expense of equity dilution. “I want to establish strong organic financing abilities as I don’t want Tamaya to be going cap-in-hand to the market.” The plan is to take advantage of the upturn in the resources cycle and then expand out of cashflow,” Mr Callaghan told WMS.
The suite of immediate growth opportunities means that Tamaya does plan a major corporate funding programme in 2007, probably for about US$80 million. Mr Callaghan promises it will be innovative and “anything but equity”. Since Mr Callaghan’s arrival at Tamaya, the company has added Armenian gold and Portuguese gold to its mainstay of copper and gold/silver in Chile’s coastal ranges. “Our plans to build a mid-tier miner are clearly taking shape,” Mr Callaghan says. “The existing production base [Chile] and the pipeline of projects provide a strong platform for the group’s growth in the medium term to 2010.” Thanks to strong copper prices, expansion, acquisitions and an operational shake-up since Mr Callaghan’s arrival, the Punitaqui project in Chile is forecast to generate annual EBITDA of A$50 million from January 2008. The Punitaqui project is near the city of Ovalle, 410 km north of the capital, Santiago. It comprises the Punitaqui processing plant, an underground copper mine at Cinabrio, as well as the Tensionales underground gold mine at Punitaqui. Total resources at Cinabrio stand at 7.4 Mt grading 1.6% copper and 6 g/t silver – good for a mine life of about eight years with exploration upside to come. At the expanded treatment rate from January 2008, annual production of 26-28 Mlb, at costs trending down to US$1/lb of payable copper, is forecast. Tamaya’s Chilean footprint has grown substantially with the September 2007 acquisition of a package of coastal projects from AIM-listed Latitude Resources plc. The consideration for the acquisition was US$24.7 million, satisfied by the issue of 85 million Tamaya shares and 15 million three-year options to be issued in three tranches of five million options, with each tranche exercisable at A$0.30, A$0.40 and A$0.50/share, respectively. Mr Callaghan describes the deal as “company transformational”. He says: “It doubles our copper resource in Chile and consolidates the Group’s tenement holdings in a highly prospective copper belt.” The key property in the Latitude deal is the Filipina Grande project, northwest of Vallenar in Chile’s Atacama region. It contains 12 Mt of sulphide material grading 1.28% copper and 0.34 g/t of gold, plus 2 Mt of oxide material grading 0.83% copper. Tamaya plans to start a pre-feasibility study into a 8,000 t/d operation producing 30,000 t/y of copper and 22,000 oz/y of gold-in-concentrate. There is also the potential for iron-ore credits, with Tamaya estimating the combined project is capable of generating annual EBITDA of A$170 million from July 2010. That would make the project truly “grande” within the Tamaya portfolio as it would account for the lion’s share of the group’s total forecast EBITDA potential of more than A$250 million in 2010. Another project in the Latitude portfolio is Santa Dominga, southwest of Vallenar. A resource estimate is pending after a 10,000 m drilling programme. Before Filipina Grande hits its straps,
Tamaya will become a significant gold producer from the development of its second mine – the advanced Lichkvaz project in Armenia. Tamaya’s interest in Lichkvaz is held through its 86%-owned subsidiary, Iberian Resources. The controlling interest in Iberian is a result of Tamaya’s A$120 million scrip takeover bid for the ASX-listed group early in 2007. How long the Iberian minorities hold out from throwing their lot in with Tamaya remains to be seen. But with Iberian set to be de-listed because of a lack of liquidity in the stock, it might not be too long before Tamaya gets to move to 100% ownership. Exploration-development work by Russian interests in past decades at Lichkvaz makes it one of the most advanced gold properties around. More than 25 km of underground development along high-grade veins and more than 70,000 channel samples have been taken over the years. That previous work is reflected in Tamaya’s estimate that it can be brought in to production at a relatively low capital cost of US$60 million. Annual EBITDA of A$40 million from March 2009 has been forecast. The project’s low development cost also reflects savings to be had by Tamaya’s ownership of an 850,000 t/y carbon-in-leach gold plant near Rishton in Queensland. Tamaya acquired the plant for the knockdown price of A$3.5 million in May 2007 and it is being relocated to Armenia, with commissioning planned for the December quarter of 2008. Full production of 100,000 oz/y of gold is forecast by March 2009. Operating costs are estimated at US$300/oz, net of by-products and inclusive of royalties. Production at Lichkvaz is planned from two ore bodies, Lichkvaz-Tey and Terterasar. Both were extensively developed in Soviet times. A compliant resource of 3 Mt grading 7 g/t of gold (675,000 oz contained gold), 31.5 g/t silver and 0.5% copper have been estimated. Tamaya is confident that the project will eventually shape up as multi-Moz property from open-cut and underground sources. It is to chase down some of that potential by starting a 22,000 m drilling programme. And despite its location, Lichkvaz boasts good infrastructure (water, power, roads and local towns). The Iberian acquisition also delivered Tamaya its fourth near-term mine development: the Montemor gold project in southern Portugal. Mining licence applications have been lodged for the project which, at last count, held 610,000 oz of gold across the measured, indicated and inferred categories and at grades ranging from 1.96 g/t to 3.04 g/t. Tamaya has forecast Montemor’s annual EBITDA potential at A$27 million from December 2010.
Not included in Tamaya’s projected growth spurt to 2010 is the Portalegre project, also in Portugal. An initial compliant resource of 7.4 Mt grading 1.37 g/t of gold for 327,000 oz has been identified to date at Portalegre. As things now stand, Tamaya’s total group copper resources in all categories have grown since June 2006 to 302,770 t of copper, 1.7 Moz of gold and 4.4 Moz of silver. Continuing exploration programmes are expected to result in fresh additions to the total resource base. Besides the programme in Armenia, more than 140,000 m of drilling is planned across properties in Chile and a 7,500 m programme is under way in Portugal. Tamaya’s mix of existing cashflow from the Chilean copper business, growth opportunities and its resource base is a story that Mr Callaghan has decided to share with the Canadian market. He says the intention is to apply for listing on the Toronto exchange early in 2008. The Canadian mining market tends to be more appreciative of Latin American mining assets than the Australian market and could well be a new source of funding for Tamaya’s growth projects. Perhaps in a taste of things to come,
Tamaya in September 2007 reported that its June halfyear after-tax profit had risen 145% to A$6.5 million. The profit was struck on sales revenue of A$22.8 million, up by 68% on the previous corresponding period, mainly due to increased copper prices and production. Mr Callaghan says the performance is significant as it marks the “beginning of the transition of the business from a single mine operation to a junior with a diverse portfolio and the potential to develop into a mid-tier company”. Mr Callaghan concludes: “The strong financial performance and our acquisition of Iberian Resources and the Latitude copper portfolio in Chile are set to transform Tamaya into an internationally competitive copper-gold mining group.”
TMR Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
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