snapshot of cudeco today , page-47

Ikeymoses.

1.The company says it will raise $200M via Azure Capital. WM has often declared his preference for equity over debt (thats the ant testicled suits issuing debt, see?). If you want to do this with debt, your banks will still require 30% equity. Which is 30M shares and not 100M shares added to the register, but you slash your NPAT by around $20M p.a. because of interest cover, and you have to hedge your copper sales forward, which is where I start using $2.50/lb Cu instead of $3.40/lb Cu. So you're basically back to where you are with 100% equity except the banks own you.

I'm not just making this up. This is what the Company has said it will do. I'm taking the Company on face value here because, to me, it hardly matters which way they fund it, each way has its costs and risks and advantages. But you can only make so much money out of the same rock anyway.

Your mate reckons the plant will cost $140M. So why does the company need to raise $200M? For a big party on opening day? Your argument is irrelevant.

2. Irrelevant. WM can try to force the share price back up to $5 with a share buyback and further stellar behaviour on his ASX announcements, but you have to work with what you've got. Which is a share price at $2/sh. If we were doing this with the share price holding at $5.50/sh WM would be telling you he'd be raising money at $8/sh. Doesn't mean it will happen. All this proves is that WM is living in fantasy land. At any rate, if he's doing debt/equity via an investment bank he'll be bent over a barrel for at least 15% right now on equity. So take your undiluted $2 and be happy.

3. SinoSteel may indeed offer finance. At commercial rates. With equity raised, at best, at a small premium to the share price if the Chinese have rocks in their heads. They *have* done this in the past, but usually they do this at par. Again, take what reality puts in front of you and leave the dreaming up to WM.

4. Your numbers did not include recoveries. The JORC code does not state that for a resource grade recoveries are taken into account. This would be ridiculous to quote a head grade inclusive of recoveries. The Cu Equivalent is based on raw grade, multiplied by value, and recalculated to Cu grade/Cu value. The amount of that actually recovered from the plant, as stated by the company, is as stated in the table.

Your numbers, to whit, were 3Mtpa @ 2.1% Cu eq. for 61Kt Cu @ $8,000/t. That is 100% recovery of "copper". But if you actually work it out, as I have done, and add in payability you get a significant difference in the end value of the ore. Metal into plant - losses = metal out. You then take that, give it to a smelter, who take their cut, minus losses in their plant as well (cobalt reports to slags), and they sell the product on your behalf - which is why payability of very, very low grade cobalt is a major issue.


Smelters will not lend money without some blood and a pound of flesh. Yould you lend money to Coles to give you the opportunity to buy bananas off them at full price? No. You'd buy shares and expect a shareholder discount. Smelters will furnish the company with an offtake agreement (a contract to take product) which the company then uses to go to a bank or broker and says "We can dig it up, make a concentrate, and these lads will buy it." This provides financial certainty that their product will be sold, at commercial rates.

If they do actually help with finance, I draw your attention to Straits Resources/Tritton Resources and Sempra Metals deal. Straits is still stuck selling metal into Sempra's contract at ridiculously low prices, which is why Tritton makes no money. Do you think this is any different than an investment bank holding you over the barrel for hedging, and it'll be a magical fairyland of free profits?

7. Again, you are trying to mix oxides and primary zones and their values.

If CDU is not going to treat the oxide zones, they are not going to recover the native copper. If they treat the native copper, they are not going to recover the Au and Co. If they treat the primary sulphide they will get the Au and Co, but they won't get a premium for native copper. The primary zone will also be at the lower end of the grade curve as it has not been upgraded by supergene enrichment.

So you cannot have this all ways. Your figures take the best grade (which is an equivalenced grade!) at the highest throughput rate, and work from there. If the company is going to high-grade the native copper, then the Au and Co is immaterial. Oxide copper zones are 0.8% Cu, no credits, at best. Native Cu zones could be 1.6%, no credits. Sulphide zones could be 1.6% Cu equivalent, no premium.

8. You are talking out your nethers. You assume the Congo concentrates are dirty. It is true that some cons out of the Congo are uraniferous, but that is more of a marketing headache, as only some smelters will handle the cons - usually Japanese and Chinese. That's hardly a negative right now. Certainly it would make a hot con from Australia a delicate proposition as we have not got a treaty in place for sale of uranium to China, which would nobble sales of hot concentrates out of Australia. Out of the DRC? You just pay some baksheesh to the guys with guns, problem solved.

You say that CDU's cobalt is in clean pyrite - or is it chalcopyrite? I'm not sure what you are saying, that the company has to produce a pyrite con with the Au and Co and treat that? Please talk to Havilah about how payable the Muturoo copper-cobalt deposit is, if you prefer clean, Aussie cobaltiferous pyrite. I would have thought Havilah would be rolling in cash with their 0.1% Co mineralisation by now. Somehow they aren't. Hmm. And remember, that would be a Co in con of over 2.5% Co, not a measley 0.6% Co.

You accuse me of downramping. This is patently ridiculous. How can a person downramp when he comes up with numbers, back of the envelope as they are, which suggest that the company could potentially be given a 13x PE price of $5.20. This is hardly a negative. It is, however, substantially less than $18+ which would be implied by a $1.76 EPS under your figures. If downramping consists of coming up with something that disagrees with your figures, then I guess I am doing it.

Your whole issue is that your maths are all best-case scenarios and ignore significant swathes of reality. You are free to debate, but you are not. You just quote your mates at me and ignore the company's guidance and declarations and, voila, you reaffirm $1.76 EPS.