insto strategy?, page-7

We cannot help but note the similar issue of the oxide-sulfide problem that Equinox Minerals faced when it commissioned its Lumwanna mine.

http://www.fostock.com.au/announcements/discovery-metals-ltd-dml-asx


15-Feb-2013
Morning Report\
Discovery Metals Ltd (DML, $0.94, Mkt cap $455M). Advancing into sulphide zone a positive sign. TRADING BUY.
Today’s Top Picks.

Discovery Metals Ltd (DML, $0.94, Mkt cap $455M). Advancing into sulphide zone a positive sign. TRADING BUY.
The announcement by Cathay Fortune Investment that it would decide to let its offer for DML lapse has no doubt been a negative for the DML share price.  However, a salient outcome has been the return to focus squarely on Boseto being successfully commissioned, without the distraction of dealing with potential bidder.
Yesterday Discovery provided an update for the month of January.  While on the surface it contained a mix of good and bad news, we believe the underlying message was unambiguously positive. The negative pertained to heavy rainfall, which hampered material movements.  The company stated that greater than average rainfall had affected communications, and caused flooding of roads and water influx to the Zeta pit, resulting in a loss 0.6Mt of ore being mined.  Obviously, a negative impact on costs, but also one would surmise a temporary blip.
The good news was the advancement of mining into sulphide ore.  This is critical.  The market had been concerned with Discovery encountering more oxide than sulfide during mining, and question marks were arising concerning the reserves integrity and eventual mill performance.  The company yesterday stated that recovery in January was 80% for copper, and that “ore quality continues to improve as the mine moves deeper into the sulphide zone.”  We cannot help but note the similar issue of the oxide-sulfide problem that Equinox Minerals faced when it commissioned its Lumwanna mine.
A final point. The resources market yesterday was excited by the Citic investment in Alumina, highlighting that major Chinese appetite for resource companies has returned from exile, when one considers the evaporation of corporate interest in resources during mid-late 2012 when China growth was slowing and its leadership was in question.  We believe that once Discovery has successfully ironed out its issues at Boseto that corporate interest most likely will return.
We rate Discovery Trading Buy.