omg - cdu, page-15

Hotrock1, you ask where the doom and gloom merchants are? Well, this one has actually been reading the announcement, rather than taking it as a dose of soma and reacting to a half heard sound-bite on the radio or TV.

Basically the announcement is all about new studies, for npv, for pit design, for the JORC, for extending the plant to 15mtpa. There is little detail on how the company gets to producing, and most of that contradicts previous announcements.

Firstly, on August 12th the company announced that “100% of the Process Plant and Power Plant has been paid for by CuDeco …. with zero money owing”. However, in yesterday’s announcement they now say that “CuDeco has reached an agreement with Sinosteel on payment terms for the Rocklands MPP componentry, who elected to take shares in lieu of final payment at $3.45 per share”. So, IMO, the 10th September announcement contradicts the August 12th one. The shares have not been issued. The plant HAS NOT been paid for.

Secondly, on 11th June the company announced that it “signs a binding agreement with Sinosteel for the Structural, Mechanical and Piping (SMP) installation at the Rocklands Group Copper Project. (n.b., what “Group”?) The “TURNKEY” contract includes the COMPLETE (my emphasis) installation of the ENTIRE (my emphasis again) MPP and ancillaries”. But the 10th September announcement refutes that. CuDeco has retained “full control over various areas of construction, including installation and supply of electrical cable and cable trays, concrete aprons and foundation construction and various piping supply components.” It is not a turnkey contract. Nor do we have any details of how much more capital will be required to complete the $300m MPP – just that $35m is still owing on the “TURNKEY” contract that isn’t – which has a double meaning. Does it mean that CDU currently owe $35m for work already completed? Or that it is the total amount owing under the contract? If the work hasn’t been done, they don’t owe it.

Thirdly, as noted in a previous post, despite having not released to the market any details of actual sales or cash raisings through equity or debt, they have exactly the same amount of cash in the bank at the 11th September as they did at the 30th June.

Fourthly CDU don’t seem to have much confidence in Sinosteel’s quality control or subbie negotiating abilities – as they are the reasons given in the 10th September announcement as to why CDU has retained full control over the various areas referred to above.

And fifthly, even though they have a section headed “Remaining Costs to completion of the Processing Plant” – they don’t mention it!

Anyway, the market liked it. Presumably relieved that it wasn’t number 21 in a continuing series of price sensitive announcements about the new 2012 discovery of a super-high rich zone that has been drilled to the extent of about three Olympic swimming pools in volume …. At least No.20 didn’t refer to it as new.