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Gold/Mining/Energy : Mining News of Note -- Ignore unavailable to you. Want to Upgrade?

To: LoneClone who wrote (17438)	4/9/2008 12:10:36 PM
From: LoneClone	Read Replies (1) \| Respond to of 193999

Monterrico Shares Go Over the Edge, But Does Anyone Care? By Rob Davies minesite.com Most chairmen would be quite agitated if their company’s share price was cut in half over a matter of a few days. But that was certainly not how Richard Ralph, non-executive chairman of Monterrico Metals, came across on the phone when Minews called for an update. He was naturally disappointed at the slide from 310p to 120p but was pragmatic about it. Indeed, he can well afford to be. One reason is that the free float is only 10.1 per cent, or about 2.6 million shares, so you wouldn’t need to be a very big seller to disrupt the price. Mr Ralph said he had been in contact with shareholders but he was not able to disclose who the seller was, or even if he knew. In reality of course there is only one shareholder who matters and that is Xiamen Zijin Tongguan Development Co. Ltd, otherwise known as the Zijin Consortium. It owns 79.9 per cent of the shares. For the record LS Nikko of Korea owns the other 10 per cent. Zijin gave a commitment at the time of its takeover of Monterrico last year to maintain a free float of at least 30 per cent and it did sell 10 per cent of its holding in September to reduce its own holding down to current levels. Of course these are nervous times in world stock markets and many large companies have seen their shares take a tumble. But a share price dropping by more than 50 per cent is an exception. The scene for some weakness in the share price was set when the company announced that its review of the Definitive Feasibility Study (DFS) on its Rio Blanco copper-molybdenum project was nearing completion. The problem with the original study, Mr. Ralph said, was that it sterilized a large part of the orebody under the tailings dam. The review is examining ways in which this material can be extracted to increase the size of the operation and its life. Also being re-examined are the options for transporting the concentrate to the coast. Currently the plan envisages using trucks, but a slurry pipeline was also considered and this alternative now seems to be gaining ground once again. Unfortunately, both these changes will have implications both for costs and construction times, and the likely impact of that not lost on the market. Investors are already sensitive to construction cost escalation and delays to mine commissioning. As any financier knows both those factors can knock big holes in net present value calculations. No precise numbers are known yet for the revised capital costs or start date, although Mr. Ralph pointed out that the company’s financial results will be announced next month and more information will be released then. Nevertheless, it looks increasingly unlikely that the 2010 start date will be met. Meanwhile, aside from tackling the engineering issues, Mr. Ralph says the company us making good progress on the other important issue at Rio Blanco – the social issues. All mines have an impact on the local environment and this one will be a particularly large one, treating 25 million tonnes of ore to produce 240,000 tonnes of copper and 1,800 tonnes of molybdenum in concentrates a year. If these issues are not dealt with properly at the beginning they can have major long-term consequences, and previous protests have resulted in fatalities. Even so, at a current market valuation of £33 million Monterrico Metals looks like a pretty cheap option on copper, even if the projected capital cost of US$1.44 billion is likely to grow a bit.