A little disappointed for the $27 million spent to date we...

A little disappointed for the $27 million spent to date we probably only have a resource of maybe 30 odd million ton at Olga of modest grades but fully understand that's the risk of exploration. Given that we would need a resource of well over 100 million ton for the project to be viable and using the funds spent for success as a guide it appears $100 million would have to be spent on exploration to come even close to a feasibility study for the Star mountains.

Using the model of the company to supply ore from the Star mountains to Ok tedi some 25 km isnt much different to using ore from the Nena deposit for the Frieda project from memory which is about 15 km apart. Using the figures from the lastest study of a 64 Mtpa at Frieda producing on average 304Ktpa of copper and 451Kozs of gold for the first five years at a recorvery of 88% Cu and 76% Au I was able to work out that the average ore grade would be .539% Cu and .288g/t of Au.

In the annual report of 2005 before they change the way of JORC reporting in 2004 Nena had a measured and indicated resource of 45.8Mt @ 2.95% cu and .6g/t Au. As a exercise I used the same principals of feeding ore to Ok Tedi and increased the Capex of Frieda by $556 million (10% of the cost for 10% of the ore 6.4Mtpa) to a total of $6.11Bn to allow for infrastructure between Nena and Frieda.( I know the idea is to decrease capex not increase it lol) By blending 10% of the ore from Nena it increased the grade from .539% Cu and .288g/t Au to .78% Cu and .31 g/t. A 20% blend increased it to 1.02% Cu and .35g/t Au. The increase in production is as follows.

Freida Study production first 5 years, 304Ktpa Cu, 451Kozs Au, Copper Eq 406 500Ktpa, Capex intensity per ton of Cu $13 680, Capex $5.561Bn

Nena 10% blend first 5 years, 439Ktpa Cu, 486Kozs Au, Copper Eq 549 454Ktpa, Capex intensity per ton of Cu $11 120, Capex $6.11Bn

Nena 20% blend first 5 years, 574Ktpa Cu, 549Kozs Au, Copper Eq 698 772Ktpa, Capex intensity per ton of Cu $8 743, Capex $6.11Bn

Even if the cost to develop Nena was $1bn for total capex of $6.56Bn Capex intensity per ton of Cu would be $11 939 for a 10% blend, $1 740 cheaper

If the Capex intensity goes down usually means the payback years decrease as long as the cost per pound stays the same and most of the time with higher grade ore this should decrease as well. With the increase capex the LOM intensity will probably be higher but matters little after the capex has been returned.

The issue I have with the Star mountains is we aren't the exploration arm of the Ok Tedi mine and seem to be taking all risk spending millions hoping to find a deposit to extend their mine life which may not be even viable. For instance if we use the capital I used as a ball park figure for Nena to transport 6.4Mtpa at the same grades as Frieda the capex intensity is $13 680, producing 30Ktpa Cu and 45Kozs Au. The deal would probably be in exchange for using Ok Tedi infrastructure for processing they receive half the metal. Point is instead of spending money around the Star mountains in the hope of finding economical grades perhaps we should be extending Nena with its high grade ore that hasn’t been drilled since 2006 to help feed Frieda lowering the capital intensity of the project to make it even more attractive