big bucks to pay in laos oxiana tells suitors

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Big bucks to pay in Laos, Oxiana tells suitors
Email Print Normal font Large font AdvertisementAdvertisementBarry Fitzgerald
December 4, 2007

OXIANA has reminded would-be takeover suitors that they will have to pay up for a 100,000 tonnes-a-year copper project in Laos and not the current 60,000 tonnes-a-year project.

The reminder came in the form of a staged build-up to the full 100,000 tonnes a year, with the first expansion from 60,000 tonnes a year to 80,000 tonnes a year to be completed by 2010 at a cost of $US178 million ($A202 million).

Oxiana is in no doubt that the Sepon mineral field in Laos will eventually have the reserve base to support a 100,000 tonnes-a-year operation. But rather than wait until the bigger picture at the relatively lightly explored mineral field is known, the idea is to maximise production of the boom metal through staged production increases.

The cost of the ramp-up in copper production is a bit higher than the $US150 million that some in the market had been expecting, but there has been an increase in the new annual production target from the 75,000 tonnes the market was expecting to the new target of 80,000 tonnes.

Melbourne-based Oxiana has long been tipped as a takeover target because of its high growth, part of which is to be delivered by the growth story in Laos. The group is also spending $1.08 billion on developing the Prominent Hill copper/gold project in South Australia.

In its first full year of production in 2009, Prominent Hill is forecast to produce 117,000 tonnes of copper in concentrates, along with 86,000 ounces of gold and 390,000 ounces of silver. Further out, the company is also developing the big Martabe gold deposit in Indonesia.

Oxiana is variously rumoured to be in the takeover sights of Teck Cominco, Norilsk, Xstrata and Zinifex, with the latter sometimes thrown up as a merger possibility for Oxiana, no matter how unlikely that may be. As an annual producer of more than 200,000 tonnes of copper from 2010 (including Golden Grove in Western Australia), Oxiana would be a meaningful acquisition for all but the likes of BHP Billiton and Rio Tinto.

The expansion in production in Laos will come at the expense of grade, with lower head-grade material to be introduced from the Thengkham deposits (north and south) to supplement feed from the mainstay Khanong ore body.

The reduction will be from 5.3 per cent to about 4.3 per cent copper — still enough to rank the project as one of world's highest-grade copper mines.

Oxiana estimated that the overall life-of-mine operating costs would decrease by about 10% as a result of the additional throughput.

Shares in Oxiana fell 4¢ to $3.89 in yesterday's generally firmer market for mining shares.

The reporter owns Oxiana shares.