Diversified mid-tier miner Metorex (LSE and JSE: MTX; Bank of New York ADR: MRXLY), one of last year’s best performing stocks on the Johannesburg Stock Exchange, could see its market capital increase by another 50% over the next 12 months on the back of higher copper production and development at Ruashi copper mine in the Democratic Republic of the Congo (DRC).

T-Sec analyst Nic Goodwin said after the company presented financial results for the six months ending December 2006 today that Metorex’s share price would show another sharp growth phase in the next six to twelve months as the market anticipates growth.

“Metorex is accelerating growth in copper and cobalt production and then there is also the potential of Ruashi phase II coming on stream with 45,000 tonnes of copper per month.”

Metorex reported an increase in earnings per share for the six-month period of 141% to 51.03 cents, gross revenue of R791 (US$111 million), a 135% increase in EBITDA of R317 million (US$ 44.6 million) and a jump in group profit margins from 21% to 35%.

In terms of actual cash flow, R223.5 million was generated by operations during the period, with R200m going to capital expenditure. After minorities distributions of R51.7 million, Metorex had R38.98 million in the bank.

Its copper operations contributed 36.9% to its revenue in the half year compared to a contribution of 8% in the last six months of 2005. Gold operations’ slice of revenue fell from 36% to 21.6% in this period, while the company’s coal business accounted for 23.6%, antimony 7.2% and fluorspar 10.7%.

Copper production from Chibuluma in Zambia and new project Ruashi in the DRC increased by 121% to 7,479 tonnes in this period, while the first cobalt output of 53 tonnes was produced at Ruashi. Higher production coincided with higher copper prices during this period.

Chief executive officer Charles Needham said the company was seeking to move 50,000 tonnes of ore per month compared to the current mining rate of 40,000 tonnes per month.

Chibuluma has proven reserves of 6.1 million tones at a “high grade” of 3.3% copper and an estimated life of 13 years.

The Ruashi project that came into production in this period but delivered lower recoveries than expected will reach full production in March this year. The mine produced about 2,217 tonnes of copper, but is expected to produce 10,000 tonnes of copper cathode and 1,000 tonnes of cobalt carbonate per year in its first phase.

The project is expected to overtake production at Chibuluma in its second phase, with commissioning expected in the first quarter of 2008 and production targets set at 45,000 tonnes of copper per month and 3,500 tonnes of cobalt.

Ruashi II involves the expansion of the existing plant infrastructure, construction of a solvent extraction/electrowinning (SX/EW) circuit and acid plant, and the increase in mining volumes.

“The project is going ahead, we are currently laying foundations and equipment with long lead times worth in excess of $900 million has been ordered. Project finance for the $160-180 million project will be finalised in the next month,” said Needham.

Gold production at Barberton and Consolidated Murchison fell by respectively 15% and 25% as Metorex encountered lower grades on the greenstone deposits. Barberton produced 1,410 kg of gold, down from 1,660 kg and production at Murchison fell from 372 kg to 278kg.

However, Needham, said the company was not concerned about declining grades as it was accustomed to experiencing fluctuations in grades at these operations.

Metorex was also accelerating underground development at Murchison mine to counter falling grades and lower production and planning expansion at Barberton that depended on the continuation of grade.

Interestingly, the company has started exploration for gold in the Central African Republic as its exploration arm, Pan African Resources, (Metorex holds a 55% interest) believes it will find an extension of the Tanzanian goldfield through the DRC to its large holdings in the CAR.

The Manica gold project in Mozambique was well advanced at pre-feasibility stage and could go into feasibility stage “with a bit of luck”. Geologists have defined about 1 million ounces of reserves here.

Needham said commissioning of the zinc treatment plant at Sable, Zambia would boost earnings in the short-term. The company said in a statement earlier today that the Sable copper processing facilities performed “exceptionally well”.

Fluorspar production from the Vergenoeg mine – the largest single fluorspar resource in the world – increased by 20% to 93,475 dmt and further expansions are planned here.
Vergenoeg is currently conducting a feasibility study to build an aluminium fluoride project at Richards Bay that would require 70,000 tonnes of feed.

“We would like the offtake if it comes about,” said Needham.

He said that going forward there were several components to the company’s growth, including build-up at Ruashi mine, Ruashi phase II coming on stream, increased gold production at Barberton – depending on the grade - and the Sable zinc treatment plant coming on stream.

“We have said that we are targeting copper production of 200,000 t and resources of 4 million tonnes of copper in the ground in five years. This is a tall order but there is the potential for new copper mines in Zambia and the DRC.

“At the same time our share price is now a currency to go shopping with – we are evaluating our peer group for mainly copper mergers and acquisitions.”

Metorex has seen growth in its market capitalisation from R411.295 million (US$57.8 million) to nearly R5 billion (US$ 700 million) over the past few years as it grew from a junior to a mid-tier mining company.

source news : miniweb.net