Sydney, April 3, 2006 AEST (ABN Newswire) - Pan Australian Resources Limited (ASX: PNA) on Monday said it had approved development of its Phu Kham Copper Gold mine in Laos following completion of the feasibility study. Project fundamentals indicate that the new mine could earn the company more than US$100 million per year based on today's commodities prices and an average operating cost of US$0.74/lb copper.
Managing director Gary Stafford said the development of the US$230 million mine should propel the company into mid-cap range in terms of size on the ASX.
To see the full interview on streaming video access through the link below:
http://www.starlinkmedia.com/panaust/ASX03Mar2006.htm
"The project fundamentals indicate that we'll be able to make over US$100 million per annum at today's copper and gold prices and even if you take a dollar off today's copper prices on a per pound basis, we will be making over US$50 million a year," he said.
"In terms of production, it's a project that is ten fold the size of the current gold mine that we have already in operation in Laos and so the Board decision is a big milestone in the company's development."
Mr Stafford said the additional work on the feasibility study had increased the copper and gold in the ore reserve by over 20 percent, with the ore reserve tonnes increased by over 40 percent.
"Our strip ratio has improved from 1:1 to 0.6:1 so that means that we don't have much dirt to move before we get into the ore-body. I don't know another similar project on the drawing boards or currently being mined that has such a low strip ratio," he said.
With the increase in the size of the ore reserve, Pan Australian has lifted Phu Kham Copper Gold to a 12 million tonnes per annum operation, up from a 9 million tonne per annum project.
"We are delighted that we have been able to make that decision because we have a very positive view of where copper prices and gold prices are going to go and our belief is that by building a bigger mine we will be in a better position to take advantage of continuing strength in commodity prices," he said.
Mr Stafford said the capital cost of the project would be about US$230 million, with the feasibility study fundamentals indicating that payback is achievable in three years, at today's commodities prices.
"If the copper price should slip and the gold price should slip [to US$1.35/lb and US$450/oz respectively] then we think that the likelihood is that we will still be getting payback within five years," he said.
"We've mandated ANZ Investment Bank to arrange 65% of the capital cost in the form of project debt finance and we would expect to receive from them, in the not too distant future, a letter underwriting the full amount."
"In terms of the equity component we are looking to favour existing shareholders if we need to issue new equity."
"We are also in negotiations with several parties that are interested in buying concentrate from the mine. In order to secure a concentrate off-take agreement, those parties are also prepared to assist us with the financing, which would replace some of the equity that we would otherwise have to raise."
Mr Stafford said Pan Australian had already started preparing the area for the process plant and the existing gold mine had enabled the company to remove some of the overburden material to access the underlying copper gold deposit.
He said the company would start to order long lead items within a couple of months, with the project set to take about 20 months to construct, with a completion date at the end of 2007 and first production in the early part of 2008.
"Our project has a significant location advantage, there are a large number of copper smelters in Korea, Japan and China and there is a new copper smelter in Thailand," he said.
"Our view is that in the future smelting capacity is going to move into a surplus situation, that is, there will be a deficit of concentrate supply, so that we think we will be moving forward into an extremely healthy market for copper concentrate."
"All up, with our gold mine and our copper gold mine we will be producing annually about 50,000 tonnes of copper and 100,000 ounces of gold and 400,000 ounces of silver."
"Furthermore, our exploration which is ongoing around the deposit and around other prospects and deposits within our Contract Area has identified potential additions to our resource base. Therefore, there is extremely good upside to our investment in Laos."
Contact
Gary Stafford
Managing Director
Joe Walsh
General Manager - Corporate Development
Tel: +61 7 3878 9299
www.panaustralian.com.au
Diana Taylor
Starlink Media
TEL +61 408 639 130
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