hunan nonferrous metals corporation

There has been a lot of comments on Financing the HRMP. I though I would do one post on a possible financer - Hunan Nonferrous Metals Corporation.

I actually don't expect this group will be the financier. Rather, I expect that the financiers are more likely to be groups which already have vested interests in the project getting constructed i.e. EAFD suppliers or HRMP customers. However, it is still good to identify other organisations that may be willing to finance the HRMP. Furthermore, it cannot but help the terms of such finance to perhaps have more than one set of financers willing to participate.

Conseuently, I propose that Hunan Nonferrous Metals Corporation (HNM) may be such a group.

HNM has entered three joint venture with Compass Resources - Brown Oxide, Brown Sulphide and Exploration joint ventures.

Sulphide Joint Venture - HNC is to fund 100% of the cost of a detailed feasibility study of the development of CMR's Northern Territory base metals sulphide resources. Thereafter, if HNC wishes to continue in the Sulphide JV HNC has to fund 100% of capital cost until a production plant with an annual capacity of 4 million tonne per year of mined ore is reached. Production will be split equally and each party will be responsible for its own sales and marketing.
Source: http://www.compassnl.com.au/corporate_hnc_agreement.htm

Extracts from “MINES & MONEY AUSTRALIA DAY” Presentation :
http://www.compassnl.com.au/news_room/_media/cmr_media_M&MAustralia_dayNov07.pdf

Slide 14:

Sulfides Feasibility Study

- Funded 100% by HNC
- Will examine production scenarios eg initial capacity (2 Mt/y to 4 Mt/y), incremental increase, processing options
- HNC to sole fund construction of plant to capacity of 4 Mt/y (formula to split costs if capacity higher)
- Capex anticipated between $750 M and $1000 M
- HNC has options to defer but Compass can continue – HNC buy back rights or relinquish interest
- Feasibility study 12-18 months (under way), permits and approvals (6-12 months concurrent with study), construction 12-18 months
- Production potential between 2010 to 2011

Slide 15:

Sulfides - project concept

At production capacity of 4 Mt/y can mine for > 20 years
Produce annually
- 155,000 tonnes of lead (recoveries 93%)
- 37,000 tonnes of copper (recoveries 93%)
- 6,500 tonnes of cobalt (recoveries 91%)
- 4,500 tonnes of nickel (recoveries 90%)
- Silver credits not included (150,000 oz?)
- Zinc – not enough certainty yet to include
With HNC participation Compass free-carried to substantial annual production

Slide 16:

CMR Share:

Sulfides - project economics

At Compass long term price forecasts:
Average annual revenues: $A268.2M
Free Cash Flow (Life of mine) : 2,082.8M
NPV(10) – discounted to 2007 : 832.7M

Based on internal models and assumptions and external scoping studies and attributable to Compass share only

Given that the Capital Expenditure is anticipated between $750 M and $1000 M for the Sulphide Project, and given that Intec Processing options are been considered for this project, I would think that HNM would also be interested in considering particpating in the HRMP given that its capital expenditure cost is of the order of $75M to $100M.
Perhaps 100% funding for a 50% interest.

Anyone it is always good to have a fall back position for funding to consider if other sources fall through.

Regards

SP