ZINC The base metal. News and Views. Symbol Zn Message Board

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Gold/Mining/Energy : ZINC The base metal. News and Views. Symbol Zn

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To: Gord Bolton who wrote (24)	2/2/1999 4:10:00 PM
From: Ray Hughes	Read Replies (3) of 3270

Gord: I' the Auspex Minerals Ltd. Investor Relations person. Auspex is a Vancouver-traded junior exploration company. Please consider all I say re: Auspex and its Aljustrel project in light of the fact that I'm employed as a consultant to Auspex. Add auspex-min.com to the list of zinc Websites. Auspex and 50% partner International Vestor Resources Ltd. are earning a 75% operating interest in the Aljustrel zinc, lead, silver mine and mill project in Portugal. Aljustrel was constructed by in 1989, started production in 1991, and was closed (on care and maintenance) in March 1993. Metal prices were low and the operator encountered operating problems. The problems were addressed in studies by Robertson Engineering and are under study in the current feasibility study. They appear to be easily solvable. The mill and mine facilities have been maintained in excellent condition so production could be restarted in as little as 12 months. Aljustrel would then be among the world's top 20 zinc mines producing about 165.3 mil. pounds (in concentrates) of zn per year, along with approx. 1.5 mil. oz. silver per year. Auspex/International Vestor have announced plans to merge their interests so a shareholders' meeting is scheduled for early June to vote on merger. The "Newco" would then have 41.7 mil. shares outstanding, fully diluted. Its 75% share of total zinc production would be 124.0 mil. lbs. zn or 2.97 lbs. per share. From this we calculate that each US$0.05/lb. increase in zinc price would add US$0.093 / share to after-tax earnings (the project would pay no Portuguese federal income tax on the first US$100 mil. of operating income). Given that zinc stocks can sell at 8 times EPS in a bull market (now starting), "Newco" could add about US$0.744 / share in market price from a US$0.05/lb. zinc price rise. This is about C$1.12 per share Canadian funds. Consider that the Vancouver market is presently capitalizing "Newco at slightly under C$14 million today. That equates to C$0.34 / share with the principal attendant risks remaining: 1)get the merger approved, 2)complete the bankable feasibility study now underway (Sept.), and, 3) close on financing total capital requirements of US$45 million. Ignore any upside price movement resulting from elimination of these risks and assume that "Newco's" market price would still be C$0.34 per share in April, but that thereafter zinc's price moves up by a nickel/lb. to $0.50 / lb. Look at the implications of the leverage to zinc price as shown above. Suppose zinc were to move up another nickel to US$0.55/lb! How about to US$0.70/lb that some reputable Canadian mining Analysts are forecasting? Also, "Newco" would have a bit of silver leverage from producing 0.036 oz. Ag. per share. The Aljustrel pre-feasibility study indicates a zinc operating breakeven cost (net of by-product lead/silver credits) of US$0.35/lb. which is mid-to-lower mid cost. Let me repeat that I'm biased, being the Auspex Minerals Investor Relations person.

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