by: Barry Fitzgerald From:The Australian March 14, 201212:00AM
Altona Mining (AOH): SOMETIME in the next week or so, Perth's Altona Mining will receive its first cheque for the sale of copper concentrates from its Outokumpu copper-gold project in eastern Finland, which was developed for the knockdown price of $40 million.
The hope is that confirmation that the new Kylylahti underground mine and the associated refurbished Luikonlahti treatment plant 42kms up the road have started to spit out cash will lead to a re-rating of the stock. Having said that, this market is not particularly switched on to Finland as a mining destination.
Now Finland is about as far from Perth as you can get. But for a developer-now-miner such as Altona it has been worth the trip. Apart from being able to confirm that not every miner up there is blond because of the presence of miners with Siberian heritage, Altona has also found Finland to be as mining friendly as is possible on planet earth nowadays.
It has a stable 26 per cent corporate tax rate, no royalties and no intention to introduce a mining tax. What's more, there was a $6.5m contribution from the government towards development costs and its 70 per cent funding of the cost of training up mine and mill operators. It's all been about creating jobs in a region of Finland that suffers 15 per cent unemployment -- which is not something Australia has to worry about. Well, not yet anyway.
. . . The Outokumpu project is not going to be the biggest metals producer around, with forecast annual (average) output of some 8000 tonnes of copper and 8500 ounces of gold. But as the Finns will tell you, it has created 100 jobs that weren't there in the snow before.
More important to this market is that Outokumpu is expected to be a nice little earner, given average cash costs of production of a little more than $1.30 a pound of copper (after gold credits). And it is not expected to be too long before Altona looks at expanding the project. But first Altona needs to demonstrate all is going well by getting a few quarters of steady state production under its belt.
So far so good.
Having said all that, it is worth pointing out that brokers following the stock reckon Altona trades at a discount to their valuation of the Outokumpu project. That gets particularly interesting when it is remembered that Altona also owns the Roseby copper-gold project in north Queensland. So by extension, there is nothing in Altona's share price for Roseby. It comes for free, as it were.
The clock is ticking up at Roseby, as the mighty Xstrata (owner of the Mt Isa-Ernest Henry mines and processing plants in the region) has until June 30 to decide whether to exercise an option over acquiring a 51 per cent interest in the project at an agreed price, a price determined by an independent expert -- or to walk away all together, after spending some $10m on exploration.
Altona stands to benefit whatever the Xstrata decision, remembering that the market does not give any value to Roseby in the Altona share price anyway.
Broker valuations for Roseby run from $100m up to about $180m. View that against Altona's current market cap of $150m at yesterday's price of 29.5c a share, and the June 30 decision by Xstrata becomes of real interest.
Altona has been working on a definitive feasibility study into developing Roseby as a stand-alone project, should Xstrata walk away. When the study is released, other companies in the region (Minmetals, Ivanhoe and even Wayne McCrae's CuDECO) are bound to take a squiz. And why wouldn't they? The Little Eva deposit within the broader Roseby tenements is being looked at as a starter project, producing 34,000 tonnes of copper and 12,000-15,000 ounces of gold.
