In November 2016, Euromax Resources Ltd (TO:EOX) embarked on a contract mining tender process (in contrast to the owner-operator model envisaged in its DFS). The tender focused on the first seven years of mine life and, based on indicative offers received to date, holds out the prospect of a c US$42.2m capex saving in return for a US$0.17/t, or (estimated) US$42.9m life-of-mine, increase in (undiscounted) mining operating costs and adds C$0.05, or 5.7%, to our EOX valuation on a like-for-like basis (see Exhibit 3).
Additional capex savings potentially worth C$0.10/sh
In addition to a US$42.2m initial capex saving as a result of adopting a contract mining business plan, Ausenco (with which Euromax has a lump-sum turnkey, or LSTK, agreement for the development of Ilovica-Shtuka) is reported to have identified c US$45m in further capex savings as a result of building the plant on a tighter footprint. Combined, the two reduce initial capex from US$431.2m to a potential US$344.0m and increase our valuation of EOX to C$0.97 (fully diluted).
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