To: loantech who wrote (25281 ) 11/13/2006 6:50:33 PM From: TrueScouse Read Replies (2) | Respond to Tom:e Operating Costs: During the first five years of full-scale production, cash costs of production (excluding amortization of capital) on a co-product basis (allocating costs to each metal according to its contribution to revenue) and using Low Case metal price assumptions (copper - $1.50/lb, nickel - $6.50/lb, palladium - $225/oz, platinum - $900/oz, and gold - $450) are projected at $0.81/lb for copper, $2.84/lb for nickel, and $113, $477, and $239 per ounce respectively for palladium, platinum, and gold. Alternatively, using the by-product method whereby revenues from other metals are offset against costs of a primary metal, the five-year average cash cost of copper would be $0.6/lb or, if NorthMet were viewed as a nickel mine, nickel costs would be minus $1.46/lb. Looked at another way, the operating margin is expected to be in excess of 40% on Low Case assumptions, and more than 50% on the Base Case. After state and federal taxes, the Base Case rate of return is 26.7% and the present value of the future cash flow discounted at 7.5% per annum is $595.4 million. During the first five years of full-scale operation, annual EBITDA (Earnings Before Interest, Taxation, Depreciation, and Amortization, or operating cash flow) is projected to average $175.3 million.
