PERTH – The third largest Aussie-based gold company, Oxiana [ASX:OXR], has capped off a great 12 months with gold output at its Sepon operation in Laos exceeding increased revised forecasts. Although head grade and recovery were slightly down in the December quarter and pushed gold production lower (versus the September period), Oxiana’s 80 percent-owned Sepon mine still climbed to an inaugural calendar year (CY) production total of over 165,000 ounces, compared with an initial estimate of 125,000oz and upgraded targets of 140,000oz and 160,000oz.
Sepon cash costs were higher at US$149/oz as a result of the reduced December quarter output of just under 38,000oz, and total production costs for the three months also rose, to US$234/oz, which meant cash and total costs for the full CY averaged US$135/oz and US$213/oz respectively, while Oxiana realised a received gold price of US$399/oz for the quarter and US$364/oz for the CY. Overall operating cash flow for the year came in at around US$32 million.
The company says Sepon should achieve a similar or better production performance this year ahead of the planned plant expansion, scheduled to be commissioned towards the end of this CY and designed to lift annual production to about 200,000oz-plus.
Oxiana has led the charge up the Aussie bourse of those Aussie-domiciled gold stocks with quality projects in Asia. Its market capitalisation has soared 60 percent in the past year to above A$1 billion and there’s plenty of upside potential in the group’s asset portfolio to keep punters more than interested.
Also at Sepon, Oxiana’s growth pipeline has continued to strengthen with recent exploration confirming extensions to the high-grade Khanong copper deposit, culminating in an upgrade in proven and probable reserves of 17 percent contained metal content or 120,000 tonnes from 13.5 million tonnes grading 5.1 percent copper for a contained 690,000t of copper to 15.5Mt at 5.2 percent copper for 810,000t and extending projected mine life from 11 to 13 years.
The copper project is slated to come on stream at the end of March 2005. Based on latest estimated cash costs for Khanong of US$0.37 per pound and a long-term copper price assumption of US$0.85/lb (the LME copper price recently broke through the US$1.00/lb mark), anticipated annual copper output of 60,000t is forecast to deliver operating cash flows before tax of about US$50-$60 million a year, an IRR of around 16-20 percent and capital payback after three years of full production. These parameters equate to an NPV approaching US$200 million.
In addition, Oxiana reported today (Thursday) that results from drilling at the Australian copper discovery, Prominent Hill, in which it has the right to earn a 65 percent stake (see separate article in side bar for background) suggest the presence of a larger copper-gold system than originally thought. A follow-up work program aimed at generating a preliminary resource is expected to start in March.
Meanwhile, Pan Australian Resources [ASX:PNA], an Aussie junior also looking to graduate to producer status in Laos, has announced that the gold resource at its proposed Phu Bia project could exceed 500,000oz, about 30 percent more than the pre-feasibility indication, following encouraging drill hits returned from the Long Chieng Track deposit. The current feasibility study is due to be completed in mid-2004.
OXR Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
