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The project’s running within budget and ahead of schedule. The schedule which we announced at the time of the feasibility study, in April last year, said that we would be commissioning and producing first concentrate in mid-2008.
In actual fact, we’ll start pre-commissioning in December of this year, so we’re well ahead of the schedule for first concentrate production.
In terms of the budget, the budget is US$241 million. Initially it was US$232 million, but we added an extra US$9 million of contingency as part of the funding. We’re running well within that budget.
From an operating cost perspective there’s been some upward pressure on fuel prices, which everybody’s aware of. But because of the high gold price, even if you take into account the higher oil prices that exist today and if you take into account the higher gold prices that exist today, the weight of the extra value we get from the gold means that our cash cost comes down to the mid-50s [US cents per pound] rather than the mid-70s.
We think that the copper price this year going through to 2008 is probably going to be above US$3. We would be delighted if it was above $2.50 because at $2.25 copper and $550 per ounce gold, our cash flow will be over US$100 million a year.
So, at current prices of well over US$3 for copper and well over US$600 approaching $700 per ounce for gold, we feel that things can only be very positive for us come our first full production year. Phu Bia Gold Mine
In the March quarter we had a very good turnaround in performance of the gold mine. We produced over 10,000 ounces for the quarter, which is a record for us. It probably contributed about $2.5 million, so it was a very big contributor to the company.
And also, we furthered the integration of our mining operations for the gold mine with the preparations for mining the copper-gold project.
Cash Position/Share Price
From a funding perspective we are very well positioned. We’ve got over US$50 million in cash, and we’re working through the syndication process for the senior project finance.
On that basis we don’t see any need to raise any new capital. If there’s an opportunity that arises whereby we need to raise more capital, well that’s a different matter. But in relation to funding the copper-gold project we’re building that project within budget and we’ve got sufficient funds to complete the construction of that project.
In terms of our share price performance this year, I think we’ve moved upwards by about 40 per cent since the beginning of the year. Now really what we’re seeing there is the rapid closing of the gap between the value that analysts put on our company and the Phu Kham project, and the NPV [net present value] on a per share basis. I think that when we come into production, then hopefully we’ll see a premium attached to our share price.
Outlook
The key things to look for going forward for the rest of this year are that we make good progress with developing the Phu Kham project - we keep on schedule and within budget.
From an exploration perspective, we’ve got a number of rigs drilling both in Laos and also now in Thailand.
In Thailand we have two rigs working on a copper project in northern Thailand called Puthep. We already have about an 80 million tonne Inferred and Indicated resource at Puthep, and we believe that by drilling deeper holes there’s an excellent potential to increase significantly the size of that resource and give us the basis for another Phu Kham-style operation.
