Intrepid Mines Limited: Company Insight-Explains Indonesian Divestment Regulations & Other

Mon Mar 26, 2012 8:00am EDT

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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:

    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

    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.

    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

    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.

    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.

    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.

    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.

    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.

    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.

    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.

    Thank you Brad.

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Intrepid Mines Limited
Brad Gordon
Managing Director
+617 3007 8022

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