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Source: www.smh.com.au/news/business
Universal suffers as Roseby costs rise
Jamie Freed
September 16, 2006

UNIVERSAL Resources did not quite get the reaction it was seeking from the market on Friday when a feasibility study found its Roseby copper project would cost more to develop and produce less metal than anticipated.

The capital costs of developing the Queensland copper mine jumped to $338 million, up from a pre-feasibility study estimate of $238 million last October, although much of the increase relates to its decision to mine the deposit itself rather than use contractors.

But the real disappointment was the 31 per cent fall in production, from 50,000 tonnes of copper a year to 34,000 tonnes a year. Universal shares took a big hit on Friday, closing 4c, or 21 per cent, lower at 15c.

Universal managing director Michael Hulmes said the company was forced to lower the project's output after completing the more detailed bankable feasibility study released on Friday.

"We've just got a much better feel for what we have," he said.

Universal had previously planned to raise 70 per cent of the funding for the project through debt and the remainder through equity, but Mr Hulmes said the financing mix could be re-examined given the capital cost increases.

Universal signed a joint venture deal with industry heavyweight Xstrata Copper last year that gives the Anglo-Swiss miner an option to buy up to 51 per cent of the Roseby project at a negotiated price within the next 90 days.

"We have no indication of what their intentions are," Mr Hulmes said.

Xstrata is Universal's second-largest shareholder behind rival Queensland explorer CopperCo. CopperCo gained a 15 per cent stake through a failed takeover bid last year, but has remained a shareholder.

CopperCo managing director Brian Rear said he would look at the feasibility study in detail over the weekend, but said his company planned to keep its holding in Universal.

"It's always been strategic," he said. "We have a totally different view of how to develop [the Roseby] deposit and haven't changed our mind on it."

Universal has retained BBY to help it raise the necessary equity and debt financing for the project and hopes to begin production by the end of 2008.