Finders Resources says BFS confirms Wetar copper project’s ‘robust economic viability’

Former AIM-listed mine developer Finders Resources (ASX:FND) has now completed its bankable feasibility study (BFS) for the Wetar copper project, which has valued it at US$304 million.

Finders said that the BFS has confirmed the ‘robust economic viability’ of the 95 percent owned Wetar copper project, in Indonesia. The company said it is now well positioned to take the project into the next phase of development.

The BFS will now be used as the basis of a mandate for project financing, Finders said it plans to finalise the details with lead arrangers next month.

“We have recently achieved a number of key milestones in establishing Finders as one of the few listed copper companies with potential for near‐term production,” said managing director Chris Farmer. 

“This BFS indicates that the value of the Wetar Copper Project is significantly more than our current market capitalisation even though it excludes a number of significant potential upsides including improved grade and recoveries achieved during the demonstration phase and potential satellite deposits in the tenement areas.”

The BFS base case puts the project’s NPV at US$304 million, which gives a 62 percent internal rate of return (IRR) and puts the project’s payback period at 0.9 years.

finnCap analyst Joe Lunn expects the shares to increase in value, as mine development is de-risked further. In a note to clients the analyst said: “The shares continue to trade on a 60 percent discount to the base case because of financing risk and the pending award of the forestry permit, but we expect both these risks to have been removed in July. 

“Thereafter, we expect the shares to increase in value towards our fully diluted valuation of 77 Australian cents per share.”

The study puts life of mine copper production at 150,000 tonnes, over a planned 9 year production period. 

It estimates total capital costs of US$155 million for Stage 1 and Stage 2. The BFS is based on a three stage production ramp‐up of copper cathode, to 25,000 tonnes each year.

Finders said that the existing 1,825 tonne a year demonstration plant will be restarted within 33 months, once development is green-lighted. Then production will grow to 7,000 tonnes per year with the expansion of the demonstration plant, after about 10 months from the start of construction.

Expansion to the full 25,000 tonnes capacity will happen around 10 months later, with the re‐commissioning of the Whim Creek plant. Finders said it expects full production will be reached by the end of 2013.

Finders acknowledged that capital costs have increased from prior guidance, because it has decided to buy some equipment rather than leased it, and it has also brought forward a number of previously deferred items including a neutralisation plant.

The mine will have operating cash costs of $1.09 per pound (lb) this was achieved despite a 40 percent increase in fuel prices by switching the project power to marine fuel oil from diesel, Finders said.

The company said it intends to give further updates soon, regarding the progress of its project financing process, re‐zoning to excise the project area from conversion forest classification AGM and the planned project timetable.