FYI - represents the view of CSJunQ preview – a strong Q...

FYI - represents the view of CS

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.