AOH 0.00% 12.0¢ altona mining limited

Credit Suisse| RESEARCH & ANALYTICS Research Notification...

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    0 Credit Suisse
    RESEARCH & ANALYTICS
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    0 Research Notification
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    0 AOH.AX: Altona Mining - Cloncurry reconfirmed as a mining centre as SRIG commits to JV
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    • Despite the material decline in the copper price, post ~12 months due diligence, Sichuan Railway Investment Group (SRIG) and Altona have signed their JV agreement on AOH's undeveloped Cloncurry Cu project.
    • Altona's JV equity reduces from 40% to 34% for a lower cash contribution of US$25mn from US$38mn (A$52.5mn) offsetting the FX impact on the USD value of their A$42.8mn 31 March cash. This avoids the need to raise capital while preserving an option on exploration, optimization and resource conversion upside, the oxide copper and the copper price. The district remains highly prospective. AOH retains 100% of the southern exploration.
    • The relatively low grade (0.5% Cu) of the project and peak of cycle mining costs constrained the expected returns projected by the 2014 feasibility study. However, with an AUD cost base and material mining sector deflation, the DFS A$294mn capex and US$1.96/lb opex are likely to be revised down as the engineering study obtains bottom of cycle bids from rebased contractor expectations post collapse of the QLD coal industry and winding up of LNG construction activity.
    • The agreement remains subject to regulatory approvals. The "stale" capex is fully funded to production by JV cash. We assume commitment by mid-2017 followed by 18 months construction for commissioning in late CY18 when consensus copper price expectations appear more favourable.
    • Our forecasts include an estimate of the construction/production time and changed JV equity profile in addition to an update for our current House commodity/FX price assumptions. No change to our NPV-driven $0.26/sh target price or OUTPERFORM rating.
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    0 June 02, 2016
 
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