Quarterly Activities Report - 1 July to 30 September 2011 - Discovery ...

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projects or operating phases. JOGMEC has expended the required exploration funding to earn a joint venture interest of 60%. Drilling at Dikoloti was completed in February 2011, with an additional three holes drilled at Dikoloti North. JOGMEC has indicated an intention to fund future drilling programmes and Discovery Metals’ current strategy is to continue to allow its interest in Dikoloti to dilute. Discovery Metals has submitted a renewal application to the Geological Survey Department of Botswana to retain only the most prospective parts of the Dikoloti project area and also to significantly reduce the area of current tenement holding. 8. Corporate Activities Financial The Boseto debt syndicate project finance documents were executed with the first draw down of project debt in July 2011. The Company completed the US$80 million equity portion of the Boseto project financing in June 2011. By the end of September 2011 a total of US$115 million of debt finance had been drawn to pay expenditure in the quarter and in advance for October payments, where significant mine mobile fleet expenditure is scheduled. Total debt funding of US$180 million will be applied to the Boseto processing plant for US$115 million and the Boseto mine mobile fleet for US$75 million with Caterpillar being the largest supplier of the mining fleet for the Boseto operations. In addition to project and equipment finance, the banking syndicate provides a US$25 million overrun and working capital facility plus hedging lines for both copper and silver production. Discovery Metals entered into a commodity price protection strategy by hedging approximately 40% of forecast copper and 65% of forecast silver production (for the scheduled period of the loan repayment). The hedge contracts provide downside price protection on a portion of the Boseto production. Approximately 60% of the copper production will be sold at spot market prices. The total hedged quantities are 40,000 tonnes of copper and 1,850,000 ounces of silver. The average future strike prices attained for these hedge contracts are US$4.01 per pound (/lb) for copper and US$36.07 per ounce (/oz) for silver. These compare very favourably to the Bankable Feasibility Study (BFS) prices of US$3.00/lb for copper and US$17/oz for silver and the projected life of mine cash costs of US$1.24/lb. The hedge book value was US$78 million in excess of commodity market prices at 30 September. Page 14 of 18
As the Company’s assets and prospects are located in Botswana, the Company enjoys a stable taxation regime including a progressive profitability based mining tax system that automatically adjusts the tax rate to the copper price cycle – both up and down. Approximately 2 million director and executive incentive options were exercised during the quarter for A$0.9 million. At the end of the September quarter 2011, Discovery Metals held US$118 million in cash and had drawn down Boseto project debt of US$115 million. Boseto Hedging Summary Copper‐silver production from Boseto will cash settle or receive payment from the hedging banks based on the difference between the average monthly London Metal Exchange (LME) copper price and the following contracted hedge prices. The positive market to market value (MTM) for each hedge period and total is also shown below. Hedge Period Copper Hedge Tonnes Copper Price USD/t Copper Price USc/lb Silver Hedge Ounces Silver Price US$/oz Copper Mark to Market Silver Mark to Market Jul to Sep 2012 3,000 9,208 4.18 141,489 36.32 6,410,703 745,109 Oct to Dec 2012 3,759 9,148 4.15 183,240 36.29 7,761,547 963,712 Jan to Mar 2013 3,681 9,069 4.11 160,890 36.24 7,280,661 951,349 Apr to Jun 2013 3,621 8,995 4.08 161,079 36.19 6,870,668 721,488 Jul to Sep 2013 3,939 8,918 4.05 195,759 36.13 7,149,172 1,002,969 Oct to Dec 2013 4,352 8,845 4.01 218,679 36.08 7,554,477 1,113,373 Jan to Mar 2014 3,879 8,762 3.97 180,408 36.02 6,376,837 911,434 Apr to Jun 2014 3,663 8,678 3.94 167,961 35.95 5,685,394 840,529 Jul to Sep 2014 3,370 8,597 3.90 140,370 35.88 4,947,703 695,731 Oct to Dec 2014 3,240 8,511 3.86 136,140 35.82 4,474,939 665,752 Jan to Mar 2015 3,496 8,424 3.82 163,985 35.75 4,522,691 787,301 Total/ Average 40,000 8,834 4.01 1,850,000 36.07 69,034,792 9,398,746 Based on spot prices of US$6,998/t or US$3.17/lb for copper and US$31.05/oz for silver. Further information on the Company including Mineral Resources and Ore Reserves is available on its website: www.discoverymetals.com For further information on this release and Discovery Metals Limited, please contact: Brad Sampson Managing Director Ph: +61 7 3218 0200 brad@discoverymetals.com AIM Nominated Advisor – Fairfax I.S. PLC, Contact Ewan Leggat/Laura Littley Ph: +44 20 7460 4389 or 7460 4387 UK PR – Tavistock Communications, Contact Jos Simson/Emily Fenton Ph +44 (0) 207 920 3150 or 778 855 4035 Page 15 of 18
Page 1 and 2: 20 October 2011 ASX ANNOUNCEMENT Li
Page 3 and 4: o Delivery and commissioning of mob
Page 5 and 6: 2. Boseto Operational Progress Temp
Page 7 and 8: Liebherr 9350 loading a Caterpillar
Page 9 and 10: Exploration in the Kalahari Copperb
Page 11 and 12: diamond holes were drilled over a s
Page 13: In the Kanye Basin in Botswana, fou
Page 17 and 18: Mineral Resources The total Mineral
Page 19 and 20: Appendix 5B Mining exploration enti

Quarterly Activities Report - 1 July to 30 September 2011 - Discovery ...

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