The company is well advanced in the detailed engineering design, is close to appointing a lead financier and has started purchasing the remaining surface rights.
Construction is planned to commence in the 2nd half of 2006, with production following one year later.
· At a milling rate of 2mpta, I expect Dinkidi can deliver an average of 220,000oz/pa gold equivalent (approximately 140,000oz/pa of gold and 13,000t/pa of copper) in the first 10 years. I anticipate cash costs to average US$216/oz equivalent, getting as low as US$172/oz equivalent. Total costs should average US$282/oz equivalent.
· I value CMX at A$0.28/share using long-term copper and gold prices of US$0.88/lb and US$365/oz respectively and incorporating cost assumptions more conservative than CMX’s. Earnings in the first four years of production are expected to average A$20.7m/pa (4.2x PER) while peak earnings after tax should get closer to A$35m (2.5x PER).
· The project is well leveraged to metal price assumptions. Each US$50/oz increase in the long term gold price adds A$0.11/share to the NPV while each US$0.25/lb increase in the copper price adds A$0.15/share. To illustrate this I note that at current spot prices CMX is valued at A$1.12/share and is trading at future earnings multiples of less than 1x.
I believe that CMX is one of the best value plays in the sector, both in terms of valuation and earnings multiples.
CMX Price at posting:
0.0¢ Sentiment: None Disclosure: Not Held
