OXR oxiana limited

oxiana ltd md on prominent hill

  1. 4,756 Posts.
    Attention ASX Company Announcements Platform Lodgement of Open Briefing

    Oxiana
    corporate/He, com.au
    Oxiana Limited
    Level 9, 31 Queen Street
    Melbourne
    Victoria 3000

    Date of lodgement: 29-Aug-2003
    Title: Open Briefing. Oxiana Ltd. MD on Prominent Hill Deal Record of interview:

    corporatefile.com.au

    Oxiana Limited recently announced that it was farming into the Prominent Hill prospect in South Australia owned by Minotaur Resources Limited. Oxiana can earn 65%. What was the strategic rationale for this deal and how does it fit in with Oxiana's longer term goals?

    Managing Director Owen Hegarty

    Oxiana's long term strategy is to build a successful and growing precious and base metals business with the emphasis on gold and copper. Our focus in the last year or two has been very much on building the Sepon gold and copper projects in Laos. We saw Sepon as the company maker and since we've successfully commissioned the gold operation, we've been looking for opportunities to add to our list of projects either by increased exploration, farm-in or acquisition. The initial emphasis has been on gold and Indo China although we have also stepped up our exploration activities in Cyprus with Eastern Mediterranean Minerals. We've also been looking at opportunities in Australia.
    Minotaur's Prominent Hill is in the relatively early stages of exploration and this farm-in is a way of getting involved in an exciting project without a large up front exposure. We believe Prominent Hill may have the potential to satisfy our strategic requirements. It could have robust scale, has good looking grades and may have the potential to generate significant cash flow and earnings for Oxiana over the long term but at this stage it is still very much exploration.

    corporatefile.com.au

    I appreciate the need to diversify from the Sepon Project in Laos (Oxiana 80%) but is it a little early to buy into new projects, particularly when the Khanong Copper Project is only in the early stages of construction? Will this deal have any impact on the development of Sepon?

    Managing Director Owen Hegarty

    At Sepon, everything is proceeding according to plan with both the gold operation and the copper project. The gold mine is producing strong cash flow and we're examining a possible expansion now that we believe we can significantly upgrade the resource size over time.
    At the Khanong Copper Project we're well into the detailed design and engineering, we're just about to finalise the financing and we plan to commence on-site construction at the end of the wet season in October.

    The target is to bring the copper mine into production by early 2005 and we're on track with that timetable.
    Prominent Hill is a possible "next generation" project for Oxiana. It involves modest initial exploration expenditure and a modest amount of management time so it's definitely not going to divert us from the tasks of building, operating and expanding gold and copper at Sepon. Any future Prominent Hill development would be well after Khanong Copper is into production.

    corporatefile.com.au

    What do you hope to achieve from the first stage of exploration under the farm-in?

    Managing Director Owen Hegarty

    The first stage of exploration should bring the project to a point where we decide whether or not to proceed with a pre-feasibility study. We hope to increase our confidence in the geology, resource base and the possible processing route for the gold and copper, which will involve some metallurgical test work on the different ore types.

    corporatefile.com.au

    How much evaluation has Oxiana done on Prominent Hill? Can you explain a little about the project such as its stage of development and prospectivity?
    Managing Director Owen Hegarty
    We've put together conceptual mining models and commercial studies based on the results released so far, although we're mindful that it's still an exploration project.

    We consider Prominent Hill to be very prospective. The 18 holes so far drilled into the mineralisation suggest the potential for a reasonably large ore body. When we looked at the drill results to date, we were attracted by the combination of long mineralized intersections such as 209 metres at 1.5% copper and almost Ig/t gold, the higher grade areas such as 41 metres grading

    6.1% copper and finally, the gold potential offered by results such as 57 metres at 7.7g/t.
    Although the vendors couldn't see Prominent Hill developing into a large enough project for them, it offers the longer term potential to be a significant project for Oxiana. It's not dissimilar to the way Oxiana bought into Sepon when Rio Tinto sold its 80% share.

    corporatefile.com.au

    What are the maximum and minimum payments Oxiana might be required to make under the farm-in and can you explain the payment stages and conditions?

    Managing Director Owen Hegarty

    Expenditures are subject to a series of hurdles being met and reflect the current exploration status of the property. We've agreed to spend a minimum of A$3.5 million over the next 14 months or so on exploration and metallurgical test work. However, in order to earn our first 35%, we would then need to undertake at least a pre-feasibility study which will allow us to determine whether the project is viable or not. Following this, we can then proceed with a final feasibility study. To earn the full 65%, we have to spend up to A$34 million all up, which should take any project well into construction.

    In other words, the initial outlay is only A$3.5 million, all in the ground. If the project is viable after the initial exploration program, then we'll be happy to keep going.

    corporatefile.com.au

    What about issues such as the potential scale of the project?

    Managing Director Owen Hegarty

    The minimum size gold project that Oxiana would develop is production of 100,000 ounces per annum with the potential to lift that to around 200,000 to 300,000 ounces per annum. That's what we're doing with Sepon. Initial production there is 140,000 to 160,000 ounces per annum and we're examining expansion options which could see production move to well above 200,000 ounces per annum, and higher longer term.

    A minimum scale copper operation for Oxiana is around 40,000 to 50,000 tonnes contained copper. That's the scale of project needed to generate the sort of cash flows we require to make a serious positive impact for shareholders. Subject to all the feasibility work, we think that Prominent Hill might have the potential to produce at those levels and more.

    corporatefile.com.au

    Why did Oxiana choose a farm-in when BHP and Newmont's stakes were up for sale? If you like the project, why not buy direct equity?

    Managing Director Owen Hegarty

    This option of spending money on exploration rather than buying a stake in the project outright is lower risk and reflects our desire to invest the dollars into the

    ground.

    Minotaur actually bought the BHP and Newmont stakes and now we're doing the farm-in with Minotaur. Minotaur is happy because they are carried through the project feasibility work. So from that point of view it's a simpler and cleaner way of building our confidence in the project rather than purchasing a stake directly.

    corporatefile.com.au

    Prominent Hill prospect is contained within the Mount Woods Joint Venture. Is Oxiana purely farming into the Prominent Hill prospect or does the farm-in include other areas of interest within the Mount Woods Joint Venture?

    Managing Director Owen Hegarty

    We're buying into a lot more than just Prominent Hill. Most of the A$3.5 million in initial exploration will be spent on the Prominent Hill prospect however this is just one of several anomalies that have already been identified by Minotaur. Our earn-in includes roughly 3,700km2 of prospective ground covered by all four of the Exploration Licences contained within the Mount Woods Joint Venture. Our due diligence indicates that there are many exploration possibilities in the area which offer additional upside. Our initial prime focus will be drilling out Prominent Hill which we think may have the potential to add further significant value for shareholders.

    corporatefile.com.au

    Thank you Owen.
    For previous Open Briefings visit www.corporatefile.com.au

    For more information on Oxiana Resources, visit www.oxiana.com.au

    Cheers,

    Fig Jam

    I hold a lot of OXR
 
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