Hey IDC HoldersGrab a coffee and enjoy the read about our...

Hey IDC Holders

Grab a coffee and enjoy the read about our magnificent company!

I like the sound of "rerating" once the PFS is released.

The market is finally waking up to our Mt Kare gold and silver project!

Cheers Nectar

Newcrest ahead of the pack in beating path to PNG

by: Barry FitzGerald
From: The Australian
August 15, 2012 12:00AM

ASYLUM-SEEKERS won't be the only ones headed Papua New Guinea's way in the months and years ahead.

Aussie miners with fistfuls of development dollars will also be headed up north to kick off the development of a new wave of mining projects to add to the game-changing economic boost that the $US17 billion ($16.14bn) LNG project of Exxon/Oil Search/Santos will deliver PNG from 2014.

Newcrest and South Africa's Harmony are heading the charge thanks to their world-class Wafi-Golpu gold-copper deposit. Newcrest has said that a pre-feasibility study into its development will be released on August 29, and not much else. But based on the size and quality of the resource, expectations are that it will be moved immediately into full feasibility study ahead of an eventual $US5bn development decision.

Newcrest wasn't talking as gung-ho as that on Wafi-Golpu when chief executive Greg Robinson released its annual profit report. But it was interesting to see Macquarie's equities desk pen yesterday that the joint venture had leased three floors of office space in Brisbane. It's a fair bet that the lease hasn't been taken up for a monster kava party.

What is known is that foreigners already invested in PNG, and those looking to invest, are more relaxed now that the newly elected government of Peter O'Neill has settled in.

The mining ministry in the new government stays as was, and the new Environment Minister is a former mines minister. The message seems to be that PNG is keen to be seen as providing stability for investment in the sector.

All that is good news for Newcrest, which, come August 29, will have to do a dance with the market on just where Wafi-Golpu will fit in its capital expenditure plans, given it said on Monday that 2012 was its peak capex year (Lihir in PNG and Cadia East in NSW) and, gee whiz, there might be a whole lot more free cash to pour in to dividends in the years ahead.

Mind you, Newcrest will only be up for 50 per cent of capital cost, or 35 per cent should the PNG government elect to take up a 30 per cent stake on the issue of the mining licence, as it it tends to do when projects fit into the world-class category, as Wafi-Golpu does. It looks as if Wafi-Golpu could support annual production of more than 600,000 ounces of gold and 300,000 tonnes of copper. Original discoverer CRA (now Rio Tinto) would be proud.

Funding its 50 per cent or 35 per cent share over the five years to first production in (possibly) 2017 is not a big ask, given Newcrest has managed to be finishing off a combined $3bn-plus investment in the Lihir expansion and Cadia East project while maintaining sub-15 per cent gearing.


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Indochine Mining (IDC)

AS big and as impressive as Wafi-Golpu is looking, it is not going to change the world for Newcrest, particularly if its equity interest does end up being all of 35 per cent. Nope, better leverage to PNG's mineral riches is on offer elsewhere. That's why the world's biggest mining investor, BlackRock, an 11 per cent Newcrest shareholder, might well have juiced up its PNG exposure by holding a 9.9 per cent stake in Stephen Promnitz's Indochine Mining (IDC). It is joined on the register by some other heavyweight institutional investors -- Baker Steel (10.2 per cent), Och-Ziff (7.8 per cent) and the newly arrived Genesis (6.4 per cent) out of Britain.

Indochine started out with a land package in under-explored Cambodia back in December 2010 as its main go, but has since made its main focus PNG following last year's acquisition of the Mount Kare gold-silver project, one at which Promnitz witnessed an almighty modern-day alluvial gold rush in 1988-89 as a young CRA geologist.

Mt Kare was were 6000 locals descended, shaking gold nuggets from the roots of the grass, some the size of goose eggs. More than one million ounces of gold was plucked from the area's sticky clay and, when it was all said and done, it was underlying hard-rock potential that got CRA and those that have followed excited. Indochine has been busy confirming the mass of work done in the past, as well as doing its own drilling. It is now at the point where it has got a stock exchange compliant resource of 1.8 million ounces of gold and 20 million ounces of silver, including 700,000 ounces of gold at an impressive 3.7g of gold a tonne.

A preliminary feasibility study is due next month and is expected to confirm robust economics for a high-grade open-cut with the potential to produce 100,000- 150,000 ounces of gold equivalent for an initial seven years. Then it would be off to a flying start to a bankable feasibility study, construction in 2014 and first production in 2015.

That Indochine was yesterday trading at 12c for a market capitalisation of $75 million demonstrates there are some "ifs" and "buts" around all that in the minds of some.

Next month's release of the preliminary feasibility study could force a re-rating, as could confirmation that Indochine's recent 33m hit of mineralisation with visible gold in a new prospect just to the south of the currently defined resource, showing it is more than a one-hit wonder.

Southern Cross Goldfields (SXG)

AS previously tipped, 2012 is proving to be a big one for the junior gold sector in terms of consolidation and rationalisation. It can be a sure-fire way to beat off the twin negatives of rising capital costs and the skills shortage. It can also mean making it on to investor radars by achieving some bulk where there was none before.

The latest move along those lines has been the very sensible deal between Southern Cross Goldfields and the much larger and South American-focused Troy Resources (TRY).

Under the deal, Southern is to acquire Troy's mothballed Sandstone gold project in Western Australia, including the gold processing plant, for $5m, a production royalty and options that convert into 15 per cent of Southern at an exercise price of 10c a share compared with Southern's closing price yesterday of 5.1c.

Southern plans to move the plant to its flagship Marda gold project 200km southeast of Sandstone and 150km north of Southern Cross, allowing it to get its 535,000 ounce ready-to-go resource there into production by as early as next year, initially at an annual rate of 35,000 ounces. It would have been a long wait for first Marda production otherwise.

More to the point, Southern estimates pre-production capital costs for Marda have now been halved to $25m as a result of Sandstone deal, increasing the net present value of Marda from $42m to $68m and doubling its internal rate of return to 80 per cent.

The shorthand for all that is there now will be a payback on the capital invested of about one year. Interesting stuff for a company valued yesterday at about $15m.

The best bit is that the deal should make it so much easier to debt finance the project. Sandstone itself comes with a not ready-to-go 720,000 ounce resource, getting Southern comfortably across the one million ounce inventory level needed to get investor attention in the crowded junior gold sector.

Success at Marda means it could achieve the holy grail of becoming self-funding when hunting for the next project.