A major hurdle cleared, more obstacles to come - making sense of the EMED story

 Asset

EMED’s flagship asset is the Rio Tinto mine - also known as Proyecto Rio Tinto (PRT) redevelopment - in the Andalucia region of Spain.

Option from Iberian Portugal over the exploration permit covering the Regua tungsten deposit

Biely Vrch porphyry gold project in Slovakia


20 percent shareholding in KEFI Minerals LON (LON:KEFI) - whose interests are centred on Turkey and Saudi Arabia – and the sum of the parts would appear to be far in excess of today's market cap of just £38 million. It's easy to see why, in common with many other undervalued and unloved AIM juniors, EMED are beating a path to Toronto.

Tungsten (POR) has been classified as a critical raw material by the European Commission, due to the tightness of global supply and the Iberian Peninsula has historically been one of the major sources of tungsten supply outside of China. 


Future Dec Target

PRT

A significant project. EMED foresees a 9 million tonne per year mining operation over a 14 year minelife that will produce 37,000 tonnes of copper concentrate each year.


One forecast sees the PRT providing annual earnings (EBITDA) of US$70 million, giving net present value (NPV) of £414 million (or 63p per share) and an internal rate of return of 128 percent.- high by any standards

EMED now owns 100 percent of the mining rights over the Rio Tinto mine area.

EMED now expects the Junta to begin a formal review process to determine whether it should receive the various approvals - based on EMED’s legal, technical and economic capacity to operate the Rio Tinto project.


POR

JORC compliant (2008) 1.26 million tonnes grading 0.39 percent tungsten trioxide (WO3) in the indicated category, 2.16 million tonnes grading 0.36 percent WO3 inferred.

The option acquisition price is 2.5 million EMED Mining shares,  and a commitment to spend €250,000 on the project before the option expiry date of 31 December 2011. If the option is exercised, EMED Mining would pay a further €750,000 to Iberian Portugal either as cash or in EMED Mining shares as well as committing to spend €1,500,000 on the project within three years. The vendor would retain a Net Smelter Royalty of 3 to 4 percent, dependent upon the product selling price. As part of due diligence over the next 12 months, EMED will be examining the exploration potential at Regua, auditing the mineral resource and undertaking a scoping study, which will include the scope for permitting.  EMED Mining's preliminary assessment of Regua indicates a potentially valuable tungsten project with considerable potential to add additional resources through further exploration, provided that an access issue to part of the property can be resolved.

Biely Vrch porphyry gold project in Slovakia



Currently pursuing planning and permitting for this 1 million ounce deposit, and a

scoping study confirmed the attractive economics of developing a mine. The study envisages a heap leach mining operation to yield about 60,000 ounces of gold per year over a ten-year minelife (recoveries would vary from 85-90 percent using typical CIL processing techniques), and at a capital cost of US$64 million and estimated operating costs at US$529/oz, producing 60,000 oz/y for 10 years at gold prices above US$1,000/oz, the outcome looks highly favourable.

Kefi Minerals Plc (LON:KEFI) -  awaiting important news from Saudi Arabia. submitted a total of 21 Exploration Licence Applications [ELAs] following Field Reconnaissance over some years. It is understood that the first few of these exploration licences is expected soon [But to be honest - they have been "expected" for the last three or four month!]. All the ELAs are in areas of historic gold mining and both EMED and KEFI sound quite excited about the possibilities.
 

Positive

Received the necessary signatures on a statement of non-opposition from the liquidators of the Rio Tinto copper mine’s previous owners. now formally submitted the statement to Andalucia’s regional government – Junta de Andalucia. It now hopes to reach the next big permitting milestone, referred to as ‘administrative standing’,

foresees the next big stage (“Administrative Standing”) being granted by the middle of next year, along with the necessary Mining Permit, and anticipate a 6 month build up to commissioning. 

Significant potential to extend the 14-year mine life by conversion of known mineral resources to reserves, and additional exploration which could increase the mineralisation to more than 300 million tonnes of resource

Capex to reach production is around US$120 million and by comparison with peer groups, EMED have a low capex intensity cost of just US$2,703 per annual tonne of copper production, almost half the figure achieved by their nearest peer group member, Pan Australian, who are developing in Thailand and Laos with a capital intensity figure of US$4,762 per tonne.




Negative


Land ownership - EMED does not own all the land to fully restart the mining operation. Various parts subject to liens - a passive right to retain but not sell property assets against an outstanding debt – as a result of Minas de Riotinto’s (previous owner) liquidation.

According to EMED, the only lien that is critical to the re-start of the project is currently held by the Department of Social Security, In May it was agreed that the Department of Social Security would not exercise their lien and EMED would repay the total debt owed to the department, over a five-year period.

Certain parcels of land that are required for the mine’s full operation, including tailings disposal, are held by other parties.  EMED said that negotiations are under way  but it may need to use a compulsory acquisition.the compulsory purchases could take less than 12 months, but it put the worst-case scenario at up to two years.






Future Target

Once this is Admin License granted, EMED will then finalise authorisations for other associated activities - such as tailings storage, equipment usage, blasting etc.

Finally the Junta will then verify that EMED has the necessary financing and insurances in place, before the mine finally resumes operation.

Peter Rose, mining analyst at Fox-Davies,  believe that EMED remain on schedule to restart the Rio Tinto copper mine in late 2011,” Rose said in a note to clients.The analyst rates EMED as a ‘buy’, with a 53 pence per share target (current price 10.1p).