INTERVIEW WITH MR. BRIAN REAR, MANAGING DIRECTOR OF COPPERCO LIMITED (CUO)

“CopperCo Announces Maiden Full Year Profit”

http://www.brr.com.au/event/51764

THURSDAY, SEPTEMBER 25, 2008, 2:00 PM.

            BRR    Good morning and welcome to Boardroomradio. Today, we’re talking with Brian Rear, Managing Director at CopperCo Limited. Good morning, Brian,

10                    thank for your time.

            CUO    Good morning, Tom.

            BRR    Brian, you’ve announced the maiden full year profit after tax of $5.2 million. Can you let me know a little bit more about the drivers behind this result?

15        CUO    Sure, Tom. In the year ended June 30, we started up the Lady Annie Copper Operation that we made first copper around October last year and production rates in that first few months were typically a built-up rates and we really hit our straps at the end of March. The production that we achieved for the year was around 11,000 a tonne represented that ramp up period. So we’re pretty

20                    pleased with the results for the year given that since start-up period and the year as well wore all those sort of start-up costs. So to come out the end of that with a profit, an accounting profit was very good. I think that we focus more on cash flow and you can see from the results that our EBITDA margins…. an EBITDA is really a proxy for cash flow anyway, was a good

25                    $40 million roughly and that’s about a 48% margin on revenue. So cash flow is king and this is a high margin business. We don’t actually pay any tax, Tom, but there’s an accounting for tax expense which we carried forward in the future. So really the profit before tax is relevant number here as is the EBITDA on EBIT numbers. So, there was a robust result for a start-up year

30                    for a small company.

            BRR    Okay, Brian, and another clear highlight of the past year is being the merger with Mineral Securities. Can you give me an update on where you’re at with this and what the advantages of merged operations will be?

35        CUO    Sure. We’re in the final stages of the merger process. We’re in compulsory acquisition of a small number of shares that weren’t accepted into the offer and that will hopefully finish next week, and that really completes the process. What that does is brings together a series of assets. It gives us geographic and commodity diversification. There are a quite a few assets. They’re a

40                    mixture of a direct ownership and equity ownership. The direct ownership assets are really the Sappes Gold Project in Greece and the joint venture equity share in the Lady Loretta. Lady Loretta is a very rich zinc deposit sitting 800 m away from the Lady Annie orebody and that’s a joint venture with Xstrata and the joint venture is looking and evaluating the development

45                    options for that.

                        On the equity side, the things of great interest to us are the investment in Platmin Limited, that’s an emerging platinum producer in South Africa. It’s first stage project, the Pilanesberg project is under construction and development right now and it will ready for that up around the end of the first quarter the next year, and that seems to be progressed pretty well and that’s going to start at around 250,000 ounces of combined PGMs and that’s around $300-million revenue business at start-ups, so that’s encouraging. So we have a

5                      great interest in that and we’d obviously have a great desire to improve our position in that project. We also have exposure to further precious metals, that’s gold in China, through substantial equity ownership of Tianshan, and that project is in the process of feasibility work and that will be finished early next year and then we can take a look at that as well. Then we’ve got some

10                    further exposures in Africa, South America, and Europe and there are some smaller ones. With the merger completing shortly, we’ll be looking at what assets we want to turn into value. We can do that through sale, we can do that through trade, or we can do that through further investment and development of those assets. So we will complete that exercise now and

15                    we’re in the process of integrating the businesses, that’s not a huge job for us. There are not a huge number of people in the corporate headquarters of our other company. We have the upper hand full of people here in Perth as does MinSec, the whole management of the merge entity will come back to Perth and that’s in progress at the moment.

20

            BRR    What were some of the other highlights of the past year?

            CUO    I think the main one for us was the initiation of the expansion project. We’re pushing production up from the original nameplate of 19,000 to 30,000 tonne of copper a year. That’s around 58% lift in output. We initiated that in January

25                    of this year and we’ve just completed that fully commissioned and running well. So from here on, we start to ramp the output up. Initially in the next month or two, fairly modest increases and they will start to build from December onwards, and I say that because in November we would be accessing the higher grade ores at Lady Annie. We have initiated mining

30                    activity on that orebody and assume pre-pit. So we will see ore extraction starting in November and that will build up quite rapidly. Now, the important thing about Lady Annie coming into the mix is that it’s the biggest reserve we have in our mix of five ore sources at the moment, and it’s the one, it’s the source that has got the highest grade and that will run right through the life of

35                    iron plant for the next 6 or 7 years as our plan is at the moment. So that’s really I think signals the start of the ramp up. I think given the turmoil in markets, the tightness in equity and debt, we’re very pleased that this expansion project has been brought in and finished at this time and I think that it vindicates our decision to do it early and do it almost immediately after

40                    we actually commission the stage one project. So it’s behind us and we will now reap the benefits of that decision over ensuring years. We’re giving ourselves ‘til around the middle of next year to hit the full 30,000. I would think this year that we’ll obviously produce a lot more copper than we did last year because we’ll be operating for the full year, so I’ll expect that about double

45                    the output in copper this year. I think we mentioned in the release as well the other big pressure out there is operating cost. We are able to control our cost base fairly well so far and we averaged about $1.07 a pound last year and the first few months of this year, we’re sitting at $1.04, so that’s a pleasing outcome as well. So I think if we can ramp up rapidly, maintain those very strong margins that we have, then we will look for a very good result in this coming year.

            BRR    Okay. You’ve given us a little on the outlook there for the next 12 months,

5                      what would be the next major steps for CopperCo and also what will be the major focus points?

            CUO    Certainly the push to ramp Lady Annie, we’ve always maintained a very high level of exploration in and around the operating orebodies and targeted ore bodies up there and that will continue, and that’s a two-pronged thing, we

10                    want to start to now develop further upside resources, convert them into reserves and hence, extend our mine life up the 30,000. We’d like to push that out towards the 10-year mark over the next twelve to eighteen months, and then that’s probably on the leach side where at this stage, we understand that the potential we should flatten and we should level out that on leaching of

15                    copper to cathode.

                        On the sulphides, we are keen to arrive at a point sometime next year where we can underwrite the feasibility and engineering of a sulphide project up there. We’d like to put something like 2 million tonne a year concentrate or in

20                    mining operation from 2010/11 and bring that in with around 20,000 to 23,000 tonnes of contained copper. So that’s the kind of longer term plan for the Lady Annie assets and we’re fairly bullish about the geological potential to do that. We’ve had a great run in the four years we’ve been up there. It’s cost us on average over that entire time about 5 cents a pound discovery process of,

25                    that’s cheap copper really.

                        On the broader company and corporate side, it’s to sift through those assets, move some assets and bring the values of those…..that liquidation of assets in money terms into the company and use that money to grow and push on

30                    with those couple of hot things that we like that creates the diversification from copper to platinum and precious metals, and we think that diversification can probably stand us in good state in the turbulent times that we’re experiencing at the moment.

35        BRR    Brian, thank you very much for your time. Listeners, that was Brian Rear, Managing Director of CopperCo Limited. If you have any questions for Brian or you’d like more information about this broadcast, please email brr@brr.com.au. I’m Tom McKay. Thanks for listening to Boardroomradio.

INTERVIEW CONCLUDED

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