OXR oxiana limited

Oxiana - Article from minesite.com

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    Article from todays Minesite.com news site http://www.minesite.com/

    http://www.minesite.com/archives/news_archive/2002/sept-2002/oxiana010902.htm

    Date : September 2, 2002


    Oxiana Ready To Reconsider Listing On AIM Once Gold Production Is Underway.


    When Owen Hegarty, managing director of Oxiana Resources, came over to present at the 4th Minesite Mining Forum back in February it was his intention to list his company on AIM later this year. But things have accelerated so fast at Oxiana in the meantime, and markets have gone on the wobble, so this has slid down his list of priorities. At that time he was still having some problems persuading Australian investors that Laos, which is one of the remaining communist countries in Asia, was a sensible place to mine. Since then even the pompous Australian stockbroking firm of JB Were has become a backer of Oxiana.

    Obviously the 20 per cent interest retained by Rio Tinto in the Sepon project is a draw, but it is actually the speed and efficiency with which the project has been advanced and the finance raised that has changed perceptions. This is a two part project with gold production being accelerated in order to help finance the larger copper project. At the moment the state of play is that the bankable feasibility study on the gold project was completed last year. It was very positive and US$45 million in debt and equity is funding its development. The gold plant should be commissioned at the end of this year and it is expected to produce at a minimal rate of 125,000 ounces of gold a year at a cash cost of US$150/ounce.

    It is worth emphasising that the bankable feasibility study was very conservative as it was based on a gold price of only US275/ounce against the current level of US$310/ounce and a mine life of only 8 years was derived from the proven resources. Only last month Owen Hegarty announced that drilling undertaken as part of pit shell optimisation at n the Discovery West gold deposit, the first to be mined has outlined several high grade extensions to the gold resource on and outside the margins of the feasibility study pit. These high grade extensions remain open in several directions and are expected to add significantly to the resource and reserve base with further drilling.

    At the same time he confirmed that the project was still on schedule and budget for commissioning end 2002. and that Rio Tinto had guaranteed a US$10m equivalent short term bridging loan from ANZ Bank. The UK major is secured by the deal with brokers Peake Lands Kirwan who have agreed to underwrite the exercise of about half Oxiana’s 236 million options due in September. This gives certainty that the company will receive $A30 million this month and a similar amount, hopefully, will come in from the non-underwritten portion. In view of the current performance of stockmarkets this was a very wise move.

    It was also wise because it convinced the market that there were no doubts about the funding of the gold project as the ANZ loan could be drawn down before the US$30 million longer term debt from the International Finance Corporation, part of the World Bank came into play. And with the gold project under his belt Hegarty can start to dangle the prospect of the considerably bigger copper project in front of investors. The bankable feasibility study on this should be completed by the end of this month and he will then have the advantage of moving into financing mode on it just when cash flow is starting to flow from the copper project.

    The funding requirement will be US$100 million plus, but infill and extension drilling has confirmed a very robust resource of 19 million tonnes grading 4.8 % copper at a cut off of 1.5 % copper. The deposit is open in all directions and in July Oxiana announced that scout drilling at Thengkam, only 7 kms west of the Khanong deposit, had intersected high grade copper over 3 kms of strike. This is in line with results from drilling carried out there previously by Rio Tinto and indicates the probability of a supergene copper deposit which could be mined as a satellite.

    Even as it stands the bankable feasibility study is expected to confirm that the life of the copper mine is at least fifteen years and it should produce between 45,000 and 75,000 tonnes of copper a year at a cash costs of US$0.40 cents/lb. The cash flow from the two projects will be high and Oxiana will clearly get a better rating if it lists on AIM and raises money for the copper project in London once gold production has started. This is a company that can only raise the stature of London’s mining sector. The fact that Oxiana remains unhedged and thus retains all upside to the gold price can only add to its attraction.

 
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