JunQ preview – a strong Q expected to confirm full-year target We have implemented new house copper price forecasts and marked to market JunQ10, driving minor earnings revisions across the forecast period. EPS changes: FY10 -13%, FY11 no change, FY12 +8%. We also preview the JunQ Production Report in this note. Strong JunQ expected on July 22, with confirmation that project is on track to achieve its 2010 guidance of 60-63kt of copper at an average C1 cash cost of US$0.95- 1.05/lb copper. Management call 10:00am AEST Thursday, 22 July 2010, 1800 885 418 or +61 2 9696 0911. ID 88229956. Grade control drilling gives good production visibility for the following quarter. In the MarQ result, management used this data to project lower QoQ grade in JunQ, implying that recovery is holding up and that mill throughput may be stronger in the JunQ to offset the forecast grade decline. Management should have good visibility on the SepQ outlook, but less visibility on the DecQ until grade control drilling is undertaken for that period during the SepQ. Revision to CY10 guidance is possible with the SepQ. JunQ production is expected to confirm a strong 1H, demonstrating robust operations meeting management forecasts. BanHouayxai site pre-development works are near completion. Construction is expected to commence later this quarter post sign off of the EISA. Current PhuKham 0.8% head grade will decline to reserve grade, prompting the planned 2012 mill expansion to 16-18mtpa to sustain current copper production rates. A design review is to be completed in the SepQ. Valuation: Our DCF does not assume mine life extension at Ban Houayxai or PhuKham but at A$0.65/share is an attractive premium to the share price.
PNA Price at posting:
$2.58 Sentiment: Buy Disclosure: Held
