Jabiru Metals 15 Mar 06

An emerging base metal miner in H1 2007

Revised estimates using current metal prices have further enhanced the already-robust economics of the company's emerging Jaguar base metal operation in Western Australia. Using strong existing base metal prices, the Jaguar project's NPV has grown by 280% and EBIT by 246%, over the past five months. First metal production remains on schedule for the second quarter of 2007.

"The emerging Jaguar deposit represents one of the few new sources of base metals on the development horizon in Australia."

Between December and February, the share price of Jabiru Metals nearly doubled from 17.5 cents to 32 cents. This was the highest level achieved in nearly four years. Higher average trading volumes since the start of the year provides further evidence of increased investor support for the stock.


Adding to the positive backdrop has been the strong recovery from a brief correction during February. A clear break above 32 cents will signal the resumption of the longer-term upward trend, extending the rally away from the May 2004 low of 12.5 cents.

In an ASX Open Briefing this week, Jabiru Metals' Managing Director, Gary Comb, provided an update on the economics, commissioning and exploration work currently underway on the Jaguar base metal deposit in Western Australia.

The major point of interest relates to the lucrative revision of the project's valuation and potential future returns, by using more robust commodity price assumptions.

During October 2005, Jabiru Metals revised its previous Feasibility Study estimates by using Macquarie Bank's commodity price forecasts, which generated an NPV (net present value) of $60.5 million at an 8% discount rate, and EBIT (earnings before interest and tax) of $101 million.


Using commodity prices as at March 2nd for the life of the project, the project NPV increases dramatically by 280% to about $230 million, while EBIT increases by 246% to $350 million.

Project financing arrangements that require no mandatory hedging should enable Jabiru Metals to exploit these high metals prices. This revised NPV values the Jaguar Project at a considerable market premium to current market and other projects at a comparable stage of development where hedging is mandatory.

In terms of resource potential, Gary Comb also commented on the significant likelihood of extensions to the existing five-year mine life at Jaguar.

Jabiru holds 30 kilometres of continuous strike length to the north and south of the Jaguar and Teutonic Bore deposits. This ground is prospective, as deposits like those that Jaguar and Teutonic Bore tend to occur in clusters rather than in isolation.

The most likely and immediate resource expansion opportunity is the down-plunge metal potential at Jaguar. A hole drilled 100 metres down plunge from the existing Jaguar resource intersected both the main lens and the footwall lens, indicating the massive sulphide mineralization is continuous. Further drilling of this zone will be undertaken in the near future.

In addition to the down-plunge potential at Jaguar, further mineralization exists in close proximity to both deposits.

In February 2006, the company announced a drill intercept of 131 metres @ 1.4% copper equivalent from the interpreted Teutonic Bore feeder zone, which was highly encouraging. This confirms the existence of both a feeder zone and remnant massive sulphides around the old workings at Teutonic Bore, with potential for mining.

The Daimler prospect lies about 1 kilometre north of Teutonic Bore and hosts feeder zone-style mineralization, with intercepts including 30 metres @ 2% copper equivalent. Its current dimensions cover 150 metres of strike length and 100 metres vertical depth, which simply represent the current limits of drilling.

Snowy's Bore is a less advanced prospect, where massive sulphide mineralization exists, including feeder zone-style mineralization.

All these targets warrant follow-up and Jabiru has committed to an exploration budget of $5 million per annum for the next two years.

The immediate focus is on the Teutonic Bore/Jaguar trend. The original drilling in the area was only to 100 metres depth and the Jaguar deposit starts at 300 metres depth, so there is certainly potential to find more deposits like Jaguar.

The company is in a good position to leverage off any discovery, as plant and infrastructure will shortly be in place. The Cadgebut plant has a design capacity of 350,000 tonnes p.a. but can operate at up to 550,000 tonnes p.a., allowing additional ore treatment from new discoveries.

Development at Jaguar is continuing on schedule, with completion of the box-cut expected during March, underground equipment currently arriving on site, and completion of the 110-person camp. Mill refurbishment is underway, with production of first metal concentrate expected on schedule in the second quarter of 2007.

The global commodities boom has greatly benefited the price of zinc. From a low point on the London Metals Exchange of US$738 per tonne in August 2002, prices rallied to US$2,420 in February this year - a gain of nearly 228%.


After an almost uninterrupted climb, a pullback was overdue in February. Despite falling by 18.5% to US$1,970, positive investor sentiment toward zinc saw prices quickly recover. In the near term, we believe further consolidation is likely in the upper end of the US$2,420 to US$1,970 trading range.

With the longer-term upward trend firmly intact and the overall outlook for commodities remaining robust, we believe zinc can achieve prices above US$2,420 in the months ahead.

Jabiru Metals represents an emerging, un-hedged base metals producer at a time of record prices. Ongoing exploration could significantly boost the resource picture at Teutonic Bore. A $10 million exploration program over the next two years is sure to generate interest. For Members with no current exposure, we recommend Jabiru Metals as a Buy up to 32.5 cents.


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