Clock ticking as Cloncurry copper heats up BARRY FITZGERALD August 11, 2010 - 9:11AM .Things are stirring up Cloncurry way in north Queensland. From the update file on the region's copper riches comes the news that Exco has raised $4.9 million from the placement of 5 per cent of its shares with the Singapore-based, and Chinese-connected, Sin-Tang Development.
More to the point is that the deal has started the clock ticking on a bigger deal in which Sin-Tang could buy an interest in Exco's Cloncurry copper project (CCP), as well as provide debt financing for its development.
The broader deal cuts across the on-again, off-again, on-again talks that Exco has had with Xstrata in the last five years for ore from a development of the CCP. Xstrata's Ernest Henry treatment plant sits 8 kilometers or so away and is operating at less than half capacity.
Does the Sin-Tang deal lock Xstrata out? It doesn't. But Big Mick Davis at Xstrata or more likely his Queensland minions will have to move quickly. And they will want to be talking to 20.2 per cent (pre-placement) Exco shareholder, Ivanhoe Australia.
IVA is happy with its investment in Exco. After-all, its el supremo, Robert Friedland, reckons we are heading off into uncharted territory in terms of copper demand and prices. But IVA has got enough going on elsewhere in the region to make the decision on letting Exco go an easy one, at the right price of course.
The betting is that Xstrata will move quickly to secure the CCP, either by taking over Exco or by bidding at the asset level. The latter would leave Exco cashed up and with its White Dam gold interest, plus lots of exploration ground.
The betting reflects the obvious. Xstrata will find it difficult to let go the chance of securing 348,000 tonnes of copper just 8 kilometres from a plant which desperately needs additional ore to keep operating costs at a reasonable level, let alone keep up copper concentrate supplies to its Mt Isa smelter/Townsville.
It's all a neat situation for Exco shareholders to be in. If Xstrata does not step up and do the obvious, Sin-Tang will fill the void. And if Xstrata does do the obvious, Sin-Tang will walk away with the second prize of a profit on its 30 cents a share subscription price. Could be a handy turn too.
Exco closed at 33.5 cents a share on yesterday, valuing the company at $110 million.
EXS Price at posting:
33.5¢ Sentiment: Buy Disclosure: Held
