The depth of information contained in the release last night is to be applauded, and once again reflects favourably on the quality of the management. Assumptions are prudent and well presented- use of longer term prices (cf spot) etc. Areas identified for capital cost savings are reasonable ,but also represent a two edged sword. Try getting steel,concrete, technical staff to implement your plans at the moment! That leads us on to the $64 question-time periods for a proposed development. Getting finance is the obvious starting point and that should be addressed in the short term. Capex is US$136.5 (+ or -10%?), against total pretax cash flows of US$ 413.5m, and HER is up for 80-100% depending on how the jv with PT Aneka Tambang is structured. Depending on the actual mineplan that is an average annualised cash flow pretax of around US$ 60m. Allowing for rampup, commissioning ,interest etc, these figures could potentially stand project finance of around US$100m (ie 70% of capex) with a three year payback against an initial minelife of 6.5 years. (This is only a rough guess as we don't have forecast production rates year by year). That still leaves approx US$ 35m (A$43m )to be contributed. Capex savings would be fairly minimal-there aren't too many second hand plants floating around at present, you would seriously have to question whether reducing pipe size is viable if you want to constrain future production, and earth moving equipment is at a premium globally (though there may be opportunities post Aceh cleanup!) The overall rise in capex from the prefeas figures reflects current market situation-everyone has seen construction costs rise by between 15 and 35% over the past 12 months with rising steel/cement costs associated with shortages in skilled labour. Back to the $64 question-finance when? Maccas are quick and would have the inside running well and trully. Will they syndicate? More than likely and that does not necessarily happen overnight. I certainly don't have a crystal ball (just tender ones from being kicked on a regular basis!LOL), so hopefully further guidance is provided in the next few days. From a personal point of view I would not trust the Indonesians as far as I could kick them, but that is only my opinion. Hence my interest in the stock is academic and taken purely from an overall industry interest. Good luck to all that hold. Cheers,TAS
HER Price at posting:
0.0¢ Sentiment: None Disclosure: Not Held
