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Intrepid Mines Limited: Company Insight-Explains Indonesian Divestment Regulations & Other
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BRISBANE, AUSTRALIA, Mar 26 (MARKET WIRE) -- Intrepid Mines Limited (TSX:IAU)(ASX:IAU) - Highlights of Interview -- Clarity on Indonesian Divestment Regulations & impact on Intrepid. -- Impact on developing Tujuh Bukit mine. -- Next steps in advancing Tujuh Bukit. -- Impact on financial & operating parameters. -- Next exploration plans including expanding the resource at Tumpangpitu. -- Funding position & upside for investors. Record of interview: companyinsight.net.au Intrepid Mines Limited (market cap of approx. $430m) has announced that there is some further clarity on the Divestment Regulations in Indonesia. What are the implications for Intrepid? Managing Director, Brad Gordon The implications are limited. The two clear messages from us are really that the most significant effects of these regulations won't occur until well into the future - at least 10 years or more. Secondly the divestment will be done at a fair, commercial value. So it won't be value destructive. The Indonesian Vice-Minister for Energy and Minerals has also come out publicly and said that any divestment would be done at fair value, a public float on the IDX is acceptable as local ownership and that foreign miners could operate their assets at 49% ownership or less. Notwithstanding that, we're currently lobbying with high levels of government to explain the share market impact it's had on us in both the Australian and Canadian markets where we are listed. We think that the market reaction has been more a comment on Indonesian financial stability rather than a comment on the impact on the project. It also strengthens our resolve to look for other world class assets, which we've been doing for several years now anyway. companyinsight.net.au What does it mean for developing your Tujuh Bukit mine? Managing Director, Brad Gordon We actually have two projects at Tujuh Bukit. We have a gold oxide project and a much larger copper porphyry project. We were going to bring the gold oxide project into production first, but if these regulations remain in place it may be preferable that we delay the gold oxide project and start both projects at the same time. It would mean we would hold 49% of the copper porphyry project around 10 years after we get into production. The other implication for the project is that we would have to assess our expenditures on exploration so that they match the risks in operating in Indonesia. That's something we do regularly anyway. We have to be prudent in how we manage our cash in these circumstances. companyinsight.net.au What are the next steps to advance Tujuh Bukit? Managing Director, Brad Gordon We currently have 12 drill rigs operating. We're currently doing an in-fill drilling program on the gold oxide project, which will lead to a pre-feasibility study on that. We're also drilling to expand the copper porphyry resource, which will lead to a scoping study on that project later this year. That will be the first value assessment of the project parameters and economics on that much larger copper porphyry project. companyinsight.net.au Do the financial and operating parameters change? Managing Director, Brad Gordon Not significantly. We have always said that it is unlikely that Intrepid will develop the project ourselves because it is a $4-5 billion project. The Indonesian Government has already stated that mining companies can operate as minority shareholders. Divesting a further 31% of the project is something that would probably be required anyway due to the capital intensity. The government has said that a public float would be acceptable to achieve a divestment. We would only have to achieve that around 10 years after production commences. As I said before, a divestment would only be done at fair value. There has been a tendency in Indonesia when commodity prices are high for the Government to try for a better return for themselves from projects. On the other hand, when times are tough there is a tendency for them to more liberal and deregulate. We see the latest announcements as part of that cycle. As part of the new mining law in 2009, a regulation came out in 2010 to limit local ownership to 20% and this latest regulation has come out within 2. The 2009 mining law was successful in attracting foreign investment, but this latest regulation has the potential to undermine that. companyinsight.net.au Can you explain what is next for exploration? You must surely drill one of those 689 metre intersections at 1% copper and 0.85g/t gold? Managing Director, Brad Gordon A drill intersection like that is extremely exciting and grabs everyone's attention. If we weren't on investors' radar screens before that intersection, we are now. We've got a lot of interest because of it from the market and also corporates. Our immediate plans are to follow up on that hole. We think that is part of a new high grade system which would alter and improve our development plans if that is the case. We are also looking to expand the main mineral resource at Tumpangpitu, which currently stands at 15 billion pounds of copper and 25 million ounces of gold. We're looking to expand that resource to over 2 billion tonnes and that would well and truly support a project which would be classified as a tier one project on a world scale. The exciting aspect is that we are still at an early stage in understanding the total system. We've only really drilled part of the first porphyry system and we have identified now four systems. companyinsight.net.au Have you done metallurgical tests on the oxide ore at Tumpangpitu? Managing Director, Brad Gordon Although most of the focus on the project has been centred on the copper porphyry, we think that the gold oxide project will have a value of around $1 billion in its own right at some time in the future. The metallurgical test work on the gold oxide was conducted by Kappes, Cassiday & Associates in Nevada. They are considered the leading experts in heap leach metallurgy. Their work resulted in a very positive scoping study, which we published last year. companyinsight.net.au What is your funding position and what are your planned commitments? Managing Director, Brad Gordon We currently have around $150 million in cash with no debt. We're reviewing our exploration expenditure in light of the recent divestment regulations. At this stage we believe that we will have around $100 million cash in the bank by the end of calendar year 2012. We're certainly well-funded to continue developing Tumpangpitu and also to look around the world for other good quality projects. companyinsight.net.au What is the upside in the share price for investors? Managing Director, Brad Gordon Management's focus has lately been on the divestment regulations, but our longer term focus is where we can add most value. The project is the largest copper/gold project in the world that isn't in the hands of a major. It really provides us with tremendous scope to add considerably more value for investors. As I said before, the value of the smaller, gold oxide project could alone be worth $1 billion. The best opportunity to create value for shareholders is to convert our indirect equity into direct equity in the project - even though that process has been delayed a little, that remains our next major corporate objective. Following that we will be focused on the forestry rezoning, which is a process that other companies have been successful in achieving in Indonesia in the last few years. companyinsight.net.au Thank you Brad. To read past Company Insights please visit companyinsight.net.au. DISCLAIMER: Gryphon Management Australia Pty Ltd trading as Company Insight has taken reasonable care in publishing the information contained in this Company Insight. It is information given in a summary form and does not purport to be complete. This is not advice. The information contained herein should not be used as the basis for making any investment decision. You are solely responsible for any use you choose to make of the information. You should seek independent professional advice before making any investment decisions. To the fullest extent permitted by applicable law, Company Insight is not responsible or liable for any consequences (including, without limitation, consequences caused by negligence) of any use whatsoever you make of the information, including without limitation any loss or damage (including any loss of profits or consequential loss) suffered by you or a third party as a result of the use. Contacts: Intrepid Mines Limited Brad Gordon Managing Director +617 3007 8022 Copyright 2012, Market Wire, All rights reserved. -0-