deutsche bank report - $0.70 price target

Stockman- 19ktpa copper, 25ktpa zinc, 350kozpa silver and 11.5kozpa gold

JML has released the Stockman Scoping Study, outlining A$185m capital for an initial 7.25 year life for LOM production of 126kt Cu, 206kt Zn, 96koz Au and 4.2moz Ag. We had been expecting a smaller (~600ktpa) project but given the resource is large enough to ensure the targeted 7-8 year minelife, the higher 950ktpa throughput gives the optimal rate of return. Strong cash flows from Jaguar and growth through Stockman means we retain a Buy and have increased our PT to A$0.70/sh

Timing and funding for Stockman

The Definitive Feasibility Study (DFS) and decision to mine are due CY11 end, funding and permitting 1H 2012, construction Q3 CY12 and commissioning 4Q 2013 with a 14 month ramp up. We continue to apply a 50% risk weighting to the project ahead of permitting (Environmental Effects Statement) and the release of the DFS. On our modeling, Jaguar cash flows could be enough to fund Stockman.

Capex, production and project details

The future Stockman operation would see underground mines at both Wilga and Currawong mines producing copper and zinc concentrates using a similar process route to Jaguar. For the first 5 years, the company has given initial guidance of
19ktpa Cu, 25ktpa Zn, 11.5koz Au and 350koz Ag. The A$185m capex estimate is circa A$6,500/tpa copper equivalent capacity. The study has shown the orebodies can be selectively mined with the likely order high grade copper zone (3.9% Cu), high grade zinc zone (7.2% Zn) followed by stringer zone (2.1% Cu and 1.2% Zn). Our modeling show cash costs could be ~USc50/lb copper given the credit suite.

Stockman presents JML with increased copper leverage

As mining at Jaguar turns to the zinc rich Bentley orebody, revenue remains a 50:50 split between copper and zinc but with mining at Stockman likely to start in the high grade copper zone it could increase to 2/3 copper from 2015.

Valuation and Risks

Based on a 10% discount rate, 50% risk weighting for the Stockman project and our long term prices of US$0.70/lb for zinc, US2.00/lb copper and 0.75 AUDUSD
our DCF derived valuation for JML is A$0.70/sh. Our price target is set broadly in
line with our DCF. Project specific and macro risks are outlined on p 7.