Several things come from this for me...1. Xstrata obviously...

Several things come from this for me...

1. Xstrata obviously could not take over EXS due to the strategic Ivanhoe holdings...so the only option for them was to buy the projects they wanted individually.

In effect, EXS could not be taken over by either party (IVA/Xstrata)...and given they were obviously having trouble raising the funds to develop, they had little choice but to take the best deal they could get from Xstrata.

2. The fragmented nature of EXS's "Cloncurry Copper Project", which is really just a collection of satellite deposits (even the largest, E1 camp, is made up of three separate deposits), probably impacted project economics for a stand-alone operation...but was not such an issue when you do not have to build a plant, which clearly fits with Xstrata here.

Mining costs were relatively high for E1 and Monakoff, which just goes to show how important orebody parameters can be; such as how fragmented the deposit is, its proximity to surface, the grade distribution and mix of minerals, nature and extent of contaminants, ease of access to markets, availability of power & water, and most importantly, timing of development and purchase of prime-cost items...all of which can make or break a project's economics.

3. EXS shot themselves in the foot somewhat however when they effectively inferred the Uranium was an important component of the resource at E1 Camp and Monakoff...

"The initial uranium resource was 28 Mt with U308 grades of 80-180 ppm (an average 124 ppm/0.012% U308) for a contained 3,477 t (7.67 Mlb U308)."

They obviously thought this was necessary to help the PFS numbers stack up a little better. Unfortunately however, this probably served only to raise a red flag with the DERM, who would have given them hell over this from an EIS point of view.. This essentially opened the door for Xstrata to walk in even cheaper than they would have given they are virtually the only game in town that can potentially treat EXS's ore in the current climate, perhaps even with DERM's blessings...(Ernest Henry already treats low grade U).

4. With the DERM roadblock before EXS due to the "uranium issue", Xstrata clearly gained the upper hand in negotiations here...even so, $175m for a project that was throwing up base case NPV numbers in the $250m+/- range, is not a bad "take the money and run" number for removing all risk!

Xstrata is more interested in supporting their entire NWQ operations though, particularly Mt Isa which is currently underutilised...so even if they break even on this purchase, it would have been worth their while.

The reality however is that Xstrata will make 3-4 times the purchase price over the next 10-15 years...if not more!

5. The "uranium issue" will not completely go away though given the project must still satisfy DERM...so I would expect Xstrata to re-submit the EIS, based on a new EH processing path.

6. Perhaps one might also feel inclined to draw conclusions from this purchase with regard to the meeting Xstrata "representatives" had with Newman (likely new Qld premier), a few weeks back...perhaps Xstrata have reason to believe U mining may be on the cards for QLD in the not too distant future, in which case project economics will only improve further here?

7. It was not all Xstrata's way here though...I think they had their hands tied somewhat and took the only path really available to them. They are about 2 years behind where they thought they would be now...with EH production down to about 30% of what it was (when the underground is up and running), and spare capacity at Mt Isa, they would have initially planned to replace this about now...but for some reason have failed to act. Not good management of ones assets if you ask me.

Interestingly, even with this deal...they still have a huge hole in their immediate production future.

8. Interestingly, EXS's "Cloncurry Copper Project" boasts total resources of;

472,000 tonnes Cu
394,000 ounces Au

Operating costs: $1.75/lb

Cap Ex: $200-300m

Valued by Xstrata (well actually, bid by the only buyer), at $175m.

Compare this to SFR's Degrussa, with a life-of-mine resource of;

531,000 tonnes Cu
579,000 ounces Au

Operating costs: $1.00/lb
Strip ratio (pit): 70:1 - yes, 70:1!!!!
Phase 2: (underground)

Cap Ex: $400-500m

Valued by the market at about $1.0 billion today (after allowing for assumed cash at hand)

This comparison underlines the fact there is much more to valuing a resource than just contained metal...which gives us a nice starting point, but once grade distribution, depth, metallurgy, orebody orientation and shape, project location, and a heap of economic factors such as power, water, market access...then finally the corporate situation which can be an assay of its own...once all these things either tick or cross the box, then you can start to put a number on the value of things.

Some would have you think it is a 2 minute process, that would fit nicely on the back of an envelope...lol

Personally, I think EXS have done reasonably well out of this, given the position they were in and what they had to work with.

It is also nice to see the focus on copper for the region strengthened by this move...and the obvious impacts on jobs for locals that will result, not only from Xstrata's spend on this, but EXS's incresed exploration programmes going forward.

God knows the state needs to earn some decent money over the next 5 years or so...deals like this are good for everyone.

I hope holders are happy though...including IVA who can still potentially cause problems here with their large holdings?

Cheers