Another broker covering:From Foster StockbrokingMorning SheetTop...

Another broker covering:

From Foster Stockbroking

Morning Sheet
Top Trades

Exco Resources Ltd (EXS.ASX)
EXS primary asset is the Cloncurry Copper Project (CCP) in Mt Isa, QLD.
CCP has a current resource of 61Mt @ 0.9% Cu including 38Mt of M&I to underpin a 10yr mine life of 25ktpa copper production.

A DFS is progressing and is due before the end of the year, with preliminary estimates of $200m capex, US$1.50/lb cash cost (strip ratio ~5) and A$256m NPV (based on a US$3/lb Cu price).
In respect of the development of CCP, there are essentially 3 options:

Fund the capex and go it alone ?part of the funding would likely come from an offshore partner (Singaporean group Sin-Tang Development recently took a 15% placement at a premium to market and have agreed to engage in further discussions re. project financing);

Toll treatment arrangement with Xstrata at their Ernest Henry mill (11Mtpa) which has plenty of capacity (Ernest Henry U/G will process 6Mtpa at capacity) and is located just 8kms from CCP; or

Complete take-out by Xstrata which would realise $200m in synergies (from the capex savings) and bring forward production by 12-18 months to capture the current high copper prices.

EXS also has the White Dam gold mine which was commissioned in April this year and will produce 50kozpa for a few years at cash costs of
With a market cap of <$200m for a company which is going to be in production in 2012 one way or another (i.e going it alone or Xstrata deal), we consider there to be great upside.