EQN - Equinox Minerals

[56gsa]

agree this is LT hold based solely on the huge copper deposit - but just think what would happen to SP if they announced they were mining the uranium (20m lbs identified atm)

if they had no copper - just U - a $1 SP would give them $22 EV/lb - quite low for a near producer. at present it appears U is hardly being rated as overall Au equiv EV is a low $58

now all this is based on ASX mkt cap - should you also include the TX mkt cap as well??

anyway - announcement that they were going to mine uranium would still shoot up sp 50-100 cents i believe...

 

[BSD]

It would appear EQN management would prefer to understand the economics of the U before entering any JV or similar. This is a good thing.

They would only need to update the U pricing and capital cost assumptions in the original BFS to get an NPV.

Setting aside trying to cashi-in on the current hype around U - when they are producing over 330 million pounds of copper at $0.70lb cash cost annually the massive free cash flow in excess of US$500m will allow them to finance a U plant pretty quickly.

When you contemplate that EQN (at current prices) could soon be generating somewhere around US$500m in free cash from copper and US$100m from uranium (2m lb pa) the current market cap is very low.


Construction is on track, financing is complete, offtake and hedging is coming very soon. Only 18 months away now from massive cashflow

There is a large seller sitting on the stock at the moment who is executing through RBC.

Once they finish - EQN is going up.

 

[petervan]

maybe xstata wont be the ones to make a play for this with the chinese showing a keen interest in the area. chinese president visiting the mines township. dont think they are there to get ideas for their own mines.

 

[Halba]

lol yeh. african metal assets are prime for china

don't forget that EQN will produce a lot of cobalt as well....copper belt has a lot of this cobalt stuff which is also reqd by china and in short supply

the 70c a pound figure doesn't include uranium and cobalt credits. with u price the way it is they would get another 100-150mil from u the U. thats about 35c/lb. So 70c-35c = 35c/lb costs. Also cobalt, maybe another 1000t-2000t recoverable? Thats about $40-50m from the cobalt or another 12 cents per pound. This means EQN's cash costs can go as low as 25c/lb perhaps.

 

[BSD]

The Chinese are building a ~US$200m smelter on the Copperbelt to complete with the Indians.

Verdanta (or related company) is building a new smelter set for completion next year (great timing) which will have excess capacity.

This capacity coming on line is the reason EQN are in no rush to complete the offtake agreements. With the extra competition, the TC/RCs could be superior to those assumed in the BFS, in addition to lower transport cost assumptions.

The cobalt was in the original BFS requiring a US$400m EW-Roast facility that has been put on hold.

Probably cost US$700m now; but US$500m per annum of cash is going to open up some serious options for future production plans.

I don't know if the Chinese will take-over EQN, but there could be an equity participation by a long term smelter partner.

 

[Halba]

yep lots of smelters popping up, reason why they want to wait to commit to offtake. Can eek out another 10c per pound there. no rush as risk reward better for waiting. construction can proceed regardless.

 

[BSD]

2007-02-15 10:38 ET - News Release

EQUINOX SIGNS FIRST LUMWANA CONCENTRATE OFF-TAKE IN 5-YEAR AGREEMENT WITH NEW CHAMBISHI COPPER SMELTER

Equinox Minerals Ltd.'s wholly owned subsidiary Lumwana Mining Co. Ltd. and Chambishi Copper Smelter Ltd., a joint venture between China Nonferrous Metal Mining (Group) Co. Ltd. (CNMC) and Yunnan Copper Industry (Group) Co. Ltd. (YNCIG), have signed a concentrate sale and purchase agreement for about 55 per cent of the copper concentrates to be produced by the Lumwana mine during the initial five years of production.

Lumwana, owned 100 per cent by Equinox, is located in the North Western province of the Republic of Zambia. The Lumwana mine will produce an average of 169,000 tonnes of copper metal per year contained in concentrates for the first six years of its 37-year mine life and construction is on schedule for commissioning in second quarter 2008.
___________________________________________________

http://new.stockwatch.com/swnet/new...x?bid=B-649963-C:EQN&symbol=EQN&news_region=C

 

[petervan]

should be up 20% today after going as high as 2.40 last night in canada. still got drilling results coming out in next months.

 

[Halba]

offtake signed with chinese

this is good news for the stock

wet season is now basically over so drilling can commence

 

[petervan]

they seemed to have great negotiating skills this management team.now can look at getting 22million pounds of uranium processed.definitly the big factor for raising another large chunk of cash.

 

[Halba]

bit unhappy about constant dilution

the share capital was about 350mil shares when i first got on board, now its 500m shares

 

[petervan]

agree halba short term but long term if they can start producing copper and uranium wheretalking 600-700million per year cash. thats not a bad warchest for expansion or share buyback.

 

[Halba]

yes its understandable. they have to get the money from somewhere, and its a very large mine. if it was in oz it will cost 50% more.

Debt is also costlier than equity, every1 knows that

 

[BSD]

A bit dissapointed management didn't put the stock in suspense and announce the completion of the placement and the completion of offtake at the same time.

An ASX allocation to the placement would have been even better.

Investors who bought stock on ASX yesterday are not going to be happy in the short term with the 5% fall and it comes across as a bit too sharp - even though the management of EQN are not spivvy in the slighest.

Anyway, they probably need the extra dough to build the village, pay for Cu puts for hedging (required for debt drawdown) and finance a feasibility study for the 20 million lb of uranium. All things that will grow the value of the company.

The greenshoe in the placement will assist in reduding the effect of flippers.

The downgrade in my val from the extra issuance is in the vicinity of 10%.

Leverage to copper price is far greater than this - the upside to my val is still massive.

Currently 15mth copper can be sold at $2.55 - $1.80 above cash costs on 300,000,000 lbs of year one production.

As another positive, this amount of raising is going to give make excellent exploration budget available to find another elephant while we build Lumwana

 

[speves]

EQN will be testing new highs this week. This time on good volumes and copper prices........and it finished on a high today. One to watch this week. I guess the question is...will it break the 2.45 or will the profit takers move in?

 

[petervan]

I get the feeling all those Canadian brokers involved with this company are going to play a uranium trump card shortly to give this share a big boost.They have put alot of investment dollars into this one and a big ramp up will make them feel a bit more secure.Could be completley wrong but it is contolled 100% from these canuck brokerages.

 

[Halba]

Assuming copper @ $1.50, EQN price will give a 100% return till commencement of first production.

 

[56gsa]

I get the feeling all those Canadian brokers involved with this company are going to play a uranium trump card shortly to give this share a big boost.

PeterV - any guesses on what the U announcement would do to the shareprice - I was thinking 70c-$1 to bring EVs in line with near producer... but then with listing on TX which seems to rate U stocks higher it could be more?

 

[petervan]

56gsa- 1 would guess up to a dollar but in the current climate and with on going drilling a few good hits could create a large spike.Believe they have to hedge up to 80% of there copper in next 5 years as part of the financing deal. Should have an annoucement about the other 25% of that shortly as 55% has already been arranged.Personally am very bullish on this share .

 

[mmmmining]

A report about how much it worth as near copper producer:

http://www.mineweb.net/whats_new/648307.htm

Also, it could be rerated as near uranium producer. Don't know what is the plan.