Perilya to proceed with high grade zinc oxide project

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    Singapore (Platts)--18Dec2006

    Australia's Perilya Limited has gained approval from its Board to proceed with the development of the 100% owned Beltana zinc mine as the first phase of advancement of its Flinders project in South Australia, the company said Tuesday. The approval was based on the favorable returns generated by the mining and direct shipment of 150,000 mt of high grade zinc ore.

    The development of the Beltana mine is expected to commence in the second quarter of 2007.

    The recently completed feasibility study shows the Beltana project has a pre-tax net cashflow of A$50.6 million (assuming an average $1.25/lb zinc price and $0.78 exchange rate) with an internal rate of return of 84%, Perilya said. At the prevailing zinc price of $2.00/lb, the project would be expected to generate pre-tax net cash flows in excess of A$130 million, the company added.

    CEO Len Jubbe said that the Beltana mine provides Perilya with a low cost entry into a significant zinc oxide resource at historically high spot prices.

    According to Perilya, the high grade tenor of the project and the tightness of the zinc market at present provides Perilya with the opportunity of identifying a market for an additional 242,000 mt of lower grade material that is contained within the existing mine design. All of this material, grading between 14-26% zinc, will be stockpiled separately on site.

    The total mineral resources for the Flinders project is currently estimated at 966,000 mt at 31% zinc containing almost 300,000 mt of zinc metal.

    The project will involve direct shipment of high grade zinc oxide ore

    through Port Pirie to smelters in Asia. The first ore shipment is expected early in 2008 with sales continuing over a two to three year period thereafter. Contained zinc sales for the 2008 financial year are forecast at 15,000 mt, increasing to 20,000 mt in subsequent years.

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    Perilya is looking low cost at the moment. And unlike some of the resource stocks it is hedged against exchange rates higher than 83 cents to the dollar. And it has a hedged lead price too.

    As China and India continue to grow and demand these basic resources you can be pretty sure this is one of the resource stocks that will go up. The management is obviously forward looking regarding economic conditions.

    Be good to see more resource companies looking to the future this way.

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