drift back will not occur, page-8

The target statement is a bit odd in its presentation of resource.

It's hard to see them making a loss from building a $130m plant.

The return from Kaiser Bill's indicated cu alone appears to be as follows:

Copper grade of .84%
Number of lbs per metric tonne = 2204 (round it to 2200)
lbs of copper per tonne = .84% * 2200 = 18.48 lbs per tonne of ore
Number of tonnes = 13.5m

18.48 * 13,500,000 = 249,480,000 lbs of copper. Round it up to 1/4 billion pounds of copper
At current prices of approx $AUD4 per lb, that conveniently works out to $1b of copper.

Using a guess of 90% recovery = $900m of copper
Subtract $130m for Capex = $770m (although feasibility states $108m for copper plant)
Assume $2 per lb opex (feasibility study states $1.80) = $770m/2 for
$385m Net profit before tax.

This ignores 25k ounces of gold, 3.5m ounces of silver, plus lead, zinc other deposits and inferred resources, cash and shareholdings.

If you use a $3 copper price the net goes down to around $270m, but that still short sells the resource by a very large margin.

CSE looks undervalued to me at 16c per share.

From the CopperStrike website:

September 2010 presentation

Feasibility Study

Link

A feasibility study examining the joint development of the copper and the zinc-lead deposits has recently been completed.

The operation will treat up to 1.8 million tonnes pa of copper ore for up to eight years and about 700 kilo tonnes pa of zinc-lead ore for two years afterward. This will result in about 15,000 tonnes pa of copper in concentrate being produced. Total mine production for the first eight years is 100,000 tonnes of contained copper, 25,000 ounces gold and 3.5 million ounces silver. In the following two years the operation will produce 42,000 tonnes of contained zinc, 25,000 tonnes of lead and 2.2 million ounces of silver.

The copper operations are based on an open cut at Kaiser Bill and underground operation at Einasleigh. The ore would be processed at separate plant and the concentrate trucked to Townsville for export. The concentrate is a clean concentrate and has attracted the interest of several potential purchases.

High NPV at Today's Prices

At a copper price of US$ 2.50/lb, the Project is estimated to return a cash surplus of A $289 million over the nine year life of the project, an NPV of A$81 million (after tax) and an IRR of 26%.