huntleys today

As mentioned in our last update, we are more comfortable the company is on the recovery path, and management is perhaps stronger for it. Our 15% discount rate, higher for management sin binning, remains for now. It represents upside if/when the plant produces metal within the new cost and timeframe given.

At 10% our valuation is $8.40ps.

Hunan appears reasonably unphased by the delays and has advanced a further $10m toward project completion. The latest payment brings the total Chinese contribution to $50m or 70% of their full $72m commitment. This excludes an additional $11m expected for repayment of past exploration expenditure. CMR and HNC have already paid $1.1m in NT stamp duty and are awaiting a final Notice of Assessment. Clarification on this front would remove a key uncertainty and allow full activation of the Hunan joint venture agreements.

Spin-out reined in


CMR has decided against spinning off its uranium interests, instead keeping them under one roof along with the other NT base metal interests. A spin-out and separate ASX listing of the grass roots NSW exploration assets remains on the cards. Management decided to hang on to the uranium because it is often intimately linked with the base metals, requiring an integrated mining and process approach. Other reasons included the cost of duplicating staff in a separate uranium vehicle in addition to several million dollars to split the assets. Tax implications may have featured in the decision.

Although a split could have accelerated shareholder gains, particularly while uranium was at recent highs, we had doubted whether the longer term interest would have been served. There was already complexity enough given Hunan has no rights to the uranium. Adding another layer of ownership and legal mirk could have been more trouble than it was worth. There will no doubt be disappointment from some quarters. The grass roots NSW exploration properties are geographically and geologically distinct making their separation more logical.