Exco Resources Will Be Producing Gold In Australia Within Six Months, And There’s A Large Copper Project In The Background Too.
By Alastair Ford / www.minesite.com
It was towards the end of a long international roadshow that Minesite caught up with Michael Anderson and Geoff Laing of Exco Resources. But with most of the airmiles now officially clocked, neither looked particularly worn out by the vigours of travelling across three continents. That sprightliness offered a first clue as to how their story, that of an emerging Australia-focused copper and gold company, had been received in Canada, the US, and London. It also, perhaps, offered some clue that the global markets in general are now cheering up.
Certainly, as they took the Minesite team through the Exco Resources story in a bar in the West End of London, both Michael and Geoff looked primed for a toast to the return of good times. Indeed, once all the formalities were done and dusted and the story told, the drinks did duly appear, and the groundwork was then laid for a planned later encounter with the boys from Barclays Capital, who, on September 11th, had been kind enough to lay on A$16 million in debt financing for Exco. That money will allow the company to proceed with development at its White Dam gold project in South Australia, a mine Michael Anderson describes as “a company starter”, but which will nevertheless turn Exco from developer into producer by as early as the first quarter of next year.
That’s a development that will have gone down well on the London-leg of the roadshow, as London’s always appreciated a miner which offers significant medium-term upside, but which is nevertheless supported in the near-term by its own cashflow. “We are”, explains Michael Anderson, “first and foremost a copper company. The gold has always been a means to an end”. So, with White Dam up and running next year, and expected to produce an estimated 120,000 ounces over a two and a half year period, the company will be free to switch its focus back to the flagship Cloncurry copper project in north-west Queensland.
Cloncurry is a much larger undertaking than White Dam, currently ringing in at around 51 million tonnes of ore grading 0.83% copper and 0.23 grammes per tonne gold, to give 425,000 tonnes of copper and 373,000 ounces of gold. The project is divided into two main areas, the northernmost of which lies adjacent to Xstrata’s well-known Ernest Henry mine, formerly owned by MIM, and named after the man who originally opened up the area back in the 1860s.
So we’re not talking about virgin territory or massive amounts of new infrastructure here. Exco has just submitted an environmental impact statement (EIS) as part of an ongoing definitive feasibility study that was begun in July 2008 and is described in company literature as being “well on the way to completion”. The plan remains to get Cloncurry into production by late 2012.
As to what happens to the Cloncurry product, well, that remains a matter for fascinating conjecture. A quick look at Exco’s share register reveals some stellar names, by far the biggest of which is Ivanhoe Australia, which holds 19.5 per cent. There’s been some conjecture in the market lately that now the Mongolian logjams are clearing, Ivanhoe’s attention will turn to its interests elsewhere as joint venture partner Rio Tinto makes more of the running on the massive Oyu Tolgoi copper project.
Whether that will have a material effect on development of Exco’s ground at Cloncurry remains to be seen, but the company has other options too, including a possible tie-in with neighbours Xstrata. There’s also, says Michael Anderson, been considerable Chinese interest, and he’s been talking to, amongst others, China Non-Ferrous.
Much work needs to be done yet, but based on studies conducted by GRD Minproc the current plan is for a 2.5 million to three million tonnes per year operation, centred just a couple of kilometres east of Ernest Henry, which will produce around 25,000 tonnes of copper and around 19,000 ounces of gold, with potential for substantial by-products from cobalt and magnetite.
The company’s already completed a prefeasibility study on Cloncurry, which investigated the viability of a slightly smaller operation producing copper at a cost around US$1.62 per pound. With the current copper price pushing back towards US$3.00, Exco clearly has plenty of room for manoeuvre, and it will be interesting to drill down into the numbers that the definitive study eventually comes out with. Watch this space.
EXS Price at posting:
27.5¢ Sentiment: None Disclosure: Not Held
