details of hedging - weep....., page-9

re: jembsb is correct I did my own calcs...whacked in even more conservatism than Jembsb with the proportion hedged due to delay in production. Rough hedging profile is available in 2005 Annual Report

production profile pa is :

10,000 t of Cu
14,000 t of Zn

50,000 oz of Au
600,000 oz of Ag

Forecast for 1st year of production

assumed Cu - 40% hedged at $1,935 USD per tonne
60% at my forecasted price of $4,928 USD per tonne (i.e. $2.20 per lb)

assumed Zn - 28% hedged at $959 USD per tonne
60% at my forecasted price of $3,136USD per tonne (i.e. $1.40 per lb)


assumed Au - 70% hedged at $400 USD per oz
30% at my forecasted price of $550 USD per oz

assumed Ag - 58% hedged at $6 USD per oz
30% at my forecasted price of $9 USD per oz


Total first 12 months production (at fully ramped up capacity) revenue works out at $99 million USD or at 0.76 AUDUSD $130 million AUD.

Not sure what the cash costs are, but in 2003 they quoted extremely low cash costs (I am sure it has gone up a lot as the industry costs have risen). But, I would have thought that EBITDA (pre any royalties) would be be around $50 million to $80 million using reasonable cash costs.

So, in conclusion Jembsb is right and Teletubbie is uninformed.

At least in my opinion.

Key risks in hedging is not being able to deliver. However, given proportion hedged relative to expected production, this is not likely to be an issue if production was to proceed.

So, risk is whether or not they get the green light to go ahead with base metal production.

On this basis, LAF looks compelling if they get the green light.