afr article on pna
Pan about to start digging in Asia Author: Stephen Wisenthal Date: 27/01/2005 Page: 17
Pan Australian Resources has been around for more than a decade, looking for everything from diamonds in Western Australia's Yilgarn desert to platinum in central Queensland. But it is copper and gold in South-East Asia that is about to turn the explorer into a producing miner.
And the increased probability of cash flow from the $US15.3 million ($20 million) Phu Bia gold project in Laos has been showing up in the share price. The stock tripled in 2003 as investors started to believe that the project, acquired from Normandy Mining and Anglo American in 2001, was going ahead.
Last week's release of a bullish research report by Goldman Sachs JBWere has sparked another surge in Pan Australian shares, which marked time for most of last year even as the company made steady progress on the goldmine.
The research note valued the shares, which were then trading at 18.5c, at between 37c and 54c. That sent the stock surging to seven-year highs, although it fell 3c on Tuesday to 24c.
The 50,000 ounce-a-year goldmine is expected to be very profitable. Pan Australian predicts earnings before tax from Phu Bia in 2005-06 of $14 million, based on a gold price of $US375 an ounce or about $20 million at current prices above $US420. But the real interest is in the Phu Kham copper-gold deposit, underneath the Phu Bia mine.
"Most of the value is in the copper-gold activities," Intersuisse analyst Peter Arden says.
The company expects to complete a feasibility study in August on a mine at Phu Kham costing as much as $US164 million, with annual production of as much as 80,000 tonnes of copper and 70,000 ounces of gold.
Some of the broker interest may be coming from Pan Australian's plans to raise the money for that development later this year. It has already appointed RMB Resources, Standard Bank of London and Macquarie Bank to arrange a loan to refinance $US10 million of the cost of the Phu Bia goldmine, although favourable exchange-rate movements have delayed the need for the money.
Analysts compare Pan Australian to Oxiana, whose shares have risen 13-fold over the past four years, taking its market value above $1 billion, as it has developed a copper and gold project in Laos. Oxiana's Sepon mine, which starts production in March, has an extremely high grade of 5 per cent.
Pan Australian Resources
Jan 11 Mining contract awarded
Jan 20 Broker report values shares at 37-54c
PNA Price at posting:
0.0¢ Sentiment: None Disclosure: Held
