Jabiru Metals Ltd (JML $0.59) Buy�� Price Target:...

Jabiru Metals Ltd (JML $0.59) Buy
�� Price Target: $0.75/sh
�� Reason For Update: Stockman Scoping Study
�� What we know:
Stockman scoping study has confi rmed project is technically and economically viable
and will now proceed with a BFS due for completion in the Dec?Q CY?11.
The key inputs are a A$185m capex for a 950kt pa plant producing on average 17kt of Cu,
28kt of Zn, 580koz of Ag and 13koz of gold over an initial period of 7.25yrs.
The initial 5 yrs will see average production of 19kt of Cu, 25kt of Zn, 350koz of Ag and
11.5koz of Au and based on current metal prices would produce free cashfl ow of A$70m
pa, followed by the high grade zinc zone with annual cashfl ow of $50m pa for the
remainder.
The resource to ?reserve? conversion is ~ 70% (assuming stringer mineralisation) and it
split into three resources:
A high grade Cu resource of 3.65mt @ 3.9% ? Cu, 4.4% Zn, 0.5% Pb, 40 g/t Ag and
0.9 g/t Au,
? A high grade Zn resource of 3.76mt @ 1.1% Cu, 7.2% Zn, 1 % Pb, 44 gt Ag and 1.1
g/t Au,
? A stringer resource of 1.1mt @ 2.1% Cu, 1.2% Zn, 0.2% Pb, 17 g/t Ag and 0.4 g/t Au.
The scoping study assumes a ramp up of the operation over 14 months and assumes new
crushing, grinding and fl otation circuits, owner operated mining and diesel generated
power for the two underground mines.
Following the granting of Native Title agreement and Mining Licence, JML has
commenced the formal Environmental Effects Statement permitting process for the
project with the Vic Govt.
If the BFS is completed in Dec?Q CY?11, fi nancing achieved mid CY?12, Stockman could be
in production say 15-18 months later.
�� What we think:
The scoping study was broadly in line with our expectation, however, capex at $180m
was probably $30-40m above our expectations.
Pleasingly, Stockman does appear to be an economic mining proposition, with average
cashfl ow of $70m pa for the fi rst 5 yrs and life of mine cashfl ow of +$450m at current
metal prices.
Whilst there was no operating costs or recoveries disclosed and a lot more work is
required, we estimate C1 Cu operating costs in the order of US$1.20/lb (net of zinc by
products credit). This assumes Cu and Zn recoveries of 82% and 72% respectively with
Cu and Zn payability of 95% and 83% respectively.