Potential...

Potential Multi-baggers

http://www.theaustralian.news.com.au/story/0,25197,22467813-5005200,00.html

IN Napoleon's battle against the Austrians at Marengo in northern Italy in 1800, victory was snatched from defeat by the arrival of reinforcements under General Louis Desaix, who upon seeing Napoleon's army in retreat, famously declared: "If I delay I shall be beaten, and I have no relish for that!"

It is a motto close to the heart of miner Les Emery, whose Marengo Mining is in no mood to wait for someone bigger to develop its $US924 million ($1.068 billion) Yandera copper and molybdenum project in Papua New Guinea's highlands.

A military enthusiast whose family's fighting exploits go back to the Crimean War, and himself a former officer in the Army Reserve, Emery named his company after Napoleon's horse, Marengo, itself named in honour of the battle.

With a market capitalisation of just under $50 million, Yandera looks like being a battle for Marengo Mining, but it is one that Emery is becoming increasingly confident of winning. With copper and molybdenum prices buoyant, Emery believes it is only a matter of time before drilling and feasibility work translates into a higher market capitalisation, which will give the junior the fire power to fund the development with debt and equity. "It is the asset that drives the company and grows the company."

At Yandera, Marengo has a resource of over 2 million tonnes of copper. Along with highly priced molybdenum resources, yields a total resource of just over 3 million tonnes of copper equivalent. Marengo is aiming for first production of 88,000 tonnes of contained copper and 4200 tonnes of molybdenum a year, starting in 2011.

Marengo has just completed a $15 million institutional share placement to fund the Yandera bankable feasibility study that should be finished by mid-2009. The shares have been placed at 36c each, and Marengo has for the first time won the backing of some North American institutions.

Emery says that calling the study "bankable" is a bit premature, since it is the bankers that will decide what is bankable. But Emery is already taking calls from would-be financial backers.

And while it is too early for Marengo to be seeking finance, Emery says any deal will almost certainly require Marengo to hedge enough production to cover the debt. For Emery, that is a small price to pay to keep the interest rate down and allow Marengo to go it alone at Yandera. "It is unrealistic to think you won't be hedging some production and it would be prudent to hedge. It is a tool you have to use as part of the funding package."

Yandera is located in Madang province on the north coast of PNG, not far from the Shaggy Ridge battleground where Australian troops in 1944 drove the Japanese from the hills.

It is also just 20km from the $750 million Ramu nickel mine development where Chinese government-owned Metallurgical Group Corporation has put locals offside, with accusations it has treated its local workers like slaves.

Emery says the allegations at Ramu haven't hurt Marengo's own relations with its workers and nearby communities, and that Marengo is committed to operating to Australian standards.

Marengo is planning to build a 100km rail line to take Yandera's production to the coast near Madang.

It will cost $US224 million to construct, including locomotives and rolling stock. The railway will transport ore to the coast where it will be concentrated before loading on to ships.

As students of military history will tell you, General Desaix didn't live to enjoy his triumph at Marengo, being shot off his horse at the moment of victory. But at Yandera, Emery and Marengo are planning to be around for the pay-off.