There is a silver-lining to the turmoil in the mining sector – development costs are falling and that is going to enable miners to squeeze more compelling returns from their projects.
Lower costs and a weaker Australian dollar from fears of a sharp slowdown in China could give shareholders in emerging mineral producers an unexpected reason to smile.
Altona Mining is a case in point. The stock bounced half a cent, or 3.3%, to 15.5 cents from a 2½-month low in late afternoon trade after the junior copper producer said a drop in the exchange rate along with lower contract mining, engineering and construction costs have more than offset near-term weakness in the price of the red metal.
This helped boost the net present value of Altona’s Little Eva project in Queensland by 37% to $346 million, which in turn has lifted the internal rate of return to 29% from 22% as capital costs fell 8% to $294 million.
Little Eva is one of the few copper deposits of significance in the world and management is hoping that the better economics will help it attract a partner to help fund its development after Xstrata declined to exercise its option over the project.
Management is looking at all options to raise the necessary capital. This includes partnerships with copper consumers and an outright sale.
Altona is already profitable thanks to its smaller-scale Outokumpu copper mine in Finland.