ABN AMRO MorgansMorning Monitor | 9 February 20095PanAust (PNA,...

ABN AMRO Morgans
Morning Monitor | 9 February 2009
5
PanAust (PNA, $0.15) Buy
Management has delivered efficient construction, development and commissioning of Phu Kham and is
now moving to stable low-cost production of copper and gold, and is evaluating a 130,000 oz per year
gold mine development at Ban Houayxai, also in Laos. Our valuation is A$0.32/share. Production is
ramping up. Throughput is at design, grade is marginally above budget and concentrate is meeting
specifications. Recovery is still below design, but is moving rapidly to budget. This has been an
extremely efficient build and commissioning, and a fast ramp-up. For calendar 2009 PNA projects
65,000 tonnes of copper in concentrate, plus approximately 75,000 ounces of gold and 500,000 ounces
of silver from mining, and processing of 12m tonnes of ore, with the head grade 17% above the life-ofmine
average. PNA projects cash flow from Phu Kham operations of US$90m for 2009, with copper
averaging US$1.45/lb (currently US$1.51/lb) and gold US$800/oz (currently above US$900/oz). PNA
has a seven-year (from 2007) US$185m debt facility with a syndicate led by ANZ Investment Bank. An
initial principal repayment of US$22m is due in 2009. Under difficult debt and equity market conditions
PNA has refinanced its US$80m subordinated debt with Goldman Sachs JBWere, with a new maturity
date of 31 March 2010. This debt has a coupon of 12%. After 31 July 2009 the rate rises to 15% and
another 75m options will issue at a 10% premium to the PNA share price. PNA has an incentive (not an
obligation) to refinance the US$80m before mid-2009. The issue of another 75M shares would dilute
value by approximately 4%.