H,Nice find.As Horsetarder1 reminded us some time ago, OZL...

H,

Nice find.

As Horsetarder1 reminded us some time ago, OZL targets projects that are capable of producing 50,000-100,000lb of copper pa, preferably at the lower end of the cost curve. OZL have already taken a strategic stake in SFR, (blocked by The Koreans), and Carrapateena, a very large deposit that will take many years to drill out, fully define and develop. Neither of these two investments will add to OZL's own production profile any time soon.

Currently, HGO and Kanmantoo do not fall into OZL's category. But realistically, with only $750m to spend, not much does fall into OZL's target category! The 'low-hanging fruit' - high grade, low cost in safe jurisdictions - well, they don't exactly grow on trees. So companies like OZL have to start compromising. Slightly smaller production, slightly higher cost per lb of Cu...

And then there is Bird's Head, targeting a world-class Cu porphyry in an under explored but highly-mineralised part of the world. Wouldn't that also be of interest to suitors..?

Currently, Kanmantoo will produce 20,000lb Cu pa, with a 6.5 year mine life. That is at 2.4mtpa through the mill. However, HGO are aiming to increase that to 2.7mtpa, and then to 3.5mtpa (at a capex of $12m). So, that would have them producing more like 30,000lb of Cu pa. Not 50,000+ as OZL would have preferred, but not far short. HGO are also looking to increase their mine life to 10 years. This will significantly add to their NPV.

OZL operate in Sth Aust./Kanmantoo is in Sth Aust.; OZL produces copper and gold/HGO produces copper and gold. OZL has money to spend/ HGO's price is tightly controlled and shorted; OZL wishes to increase their production profile while copper prices are high/HGO is the newest copper producer in Australia.

Does that sound like a strategic fit to you?

It is a competitive environment out there. OZL are just one company who are looking for acquisitions. Hopefully HGO are fully focussed on their own project execution, and are looking to add value (and boost their share price) before even considering any offers. 24 cents ($190m mcap) does not reflect the value of a 20,000lb pa Cu/Au producer.

HGO have their eyes on Kanmantoo, but hopefully are watching in the rear-view mirror also... :)

Yaq