predicted to rise to .95, page-2

http://www.vulcanresources.com.au/aurora/assets/user_content/File/Eagle%20Research%20-%20vcn19nov07_Q%20(low%20res).pdf


Cu/Co/Ni/PGE : Vulcan Resources Ltd (VCN)
By : Eagle Research (Keith Goode) VISIT TO KYLYLAHTI AND KUHMO IN FINLAND19 November 2007Year Low/High:$0.21 - $0.60Shares :RecommendationBUYDiluted No. Shares262.8m224.5m ordsShare Price$0.37Diluted Mkt Cap :A$97m16.67m Con noteTarget price (7.5%NPV: $0.79)> A$0.90Net Cash (30 Jun 07, pre rights issue)$2.3m22.57m optnswww.vulcanresources.com.auT: (+618) 9485 2929
Vulcan Resources Limited (VCN) –Bringing its First Outokumpu-Ore-Style (Cu-Co-Ni) Finnish Mine into Production by 2010
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Vulcan has made significant progress in the past 3 years’ since acquiring Outokumpu’s (OTK’s) base metal mine assets that were held by the Polar Mining subsidiary of Dragon Mining in two main regions of Finland, being the Outokumpu Cu-Co-Ni field and the Kuhmo-Suomussalmi Ni-Cu-PGE greenstone belt.
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At Kylylahti in the Outokumpu field, VCN expects to complete its BFS during MQ08 and using monies from its recent rights issue and placement, could possibly start the decline during JQ08, with production potentially from 2010 (~100 years since Outokumpu started its mine on the Keretti orebody & became a major company).
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The mineralisation at Kylylahti is classic Outokumpu-style with the recent deeper intersections of 5% to 9% Cu closely resembling Keretti-type ore visually, in content and in grade. Kylylahti also appears to consist of a series of lenses of ore, again similar to Outokumpu’s previous main mines at Keretti and Vuonos.
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One of the main advantages of having Outokumpu-type ore is that a proven metallurgical route of processing the ore is already known, which VCN are modifying using latest techniques to result in higher recoveries. The roaster site which is being used to treat Kylylahti ore in fact originally treated another Outokumpu-type ore, namely that from OTK’s 3rd mine in the district (Luikonlahti).
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The Kylylahti orebody has a 30% to 50% semi-massive higher grade keel that is to be mined for the first 7 to 10 years, followed by a lower grade disseminated hanging-wall for the mine’s probable life of 15 years to 20 years or so.
FINANCIAL ESTIMATES : (Note : This ERA scenario is just one of a number of possible scenarios that could occur) Year end June2008f2009fDH09fJH10f2010f2011f2012fCopper Prodn (cons) (100%t0002287228777088607Cobalt Prodn (cons) (100%)t00040040013741408Nickel Prodn (cons) (100%)t000192192743698Zinc Prodn (cons) (100%)t00069269223842881Gold Prodn (cons) (100%)oz0002483248386328556Cu Price ReceivedUS$/lb3.13.13.03.03.03.03.0Co Price ReceivedUS$/lb30.025.022.022.022.022.022.0Ni Price ReceivedUS$/lb14.214.013.713.713.713.713.7C1 Cash Cost Cu (payable)US$/lb0.000.000.00-1.49-1.49-1.52-1.39C3 Total Cost Cu (payable)US$/lb0.000.00n/an/an/a1.130.93NPATA$m-3.4-13.0-9.2-2.3-11.531.130.2EPS (262.8m shares)Ac-1-5-4-1-41211P/E ratio @ A$0.37xn/an/an/an/an/a3.13.2
OTHER KEY POINTS:
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VCN’s 7.5%NPV using a Cu price of ~US$6,620/t & Co at US$22/lb is ~A$0.80 (Note an 8% grade increase takes the NPV beyond A$1/share, & there is Kuhmo Ni too).
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VCN are hopeful of extending the new higher grades at depth at Kylylahti in the next drilling campaign, and could find a further lens of higher grade mineralisation.
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VCN are focusing on a number of the ~40 Outokumpu-type ore locations that could provide additional ore, or become mines.
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At least 3 possible areas have been delineated on the Kuhmo-Suomussalmi belt, that could become VCN mines, namely Peura-aho, Hietaharju and Vaara.
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Semi-massive grade Ni ore has been intersected at both Peura-aho & Heitaharju, Vaara remaining low grade disseminated.
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Northern Kuhmo is more like a PGE orebody with high Ni and Cu credits (as PGE intersections are ~4g/t to 10g/t Pt + Pd, with up to ~2%Ni & ~1.5%Cu.