Cash the key for Rex's Hillside

THE cost of developing Rex Minerals' Hillside copper project on South Australia's Yorke Peninsula has been put at $900 million.

THE cost of developing Rex Minerals' Hillside copper project on South Australia's Yorke Peninsula has been put at $900 million.

The project is the state's best near-term shot at filling the development void created by BHP Billiton's decision to walk away from a $30 billion expansion of the Olympic Dam copper mine in the state's far north.

But before Hillside, with its planned annual production of 70,000 tonnes of copper, 50,000 ounces of gold and 1.2 million tonnes of iron ore, becomes a reality Rex first has to secure a financing package, one that might or might not involve the selldown of some equity in the 100 per cent-owned project.

Rex managing director Mark Parry said a pre-feasibility study into the development found that Hillside was a "robust and significant copper project".

"Hillside is blessed with location advantages of port, power, water and near-surface ore, which are the drivers of low capital and operating costs," Mr Parry said. "In an environment where project capital spends are increasing worldwide, Hillside's capital intensity is over 30 per cent less than a recent world average estimate of $US15,000 a tonne of annual copper equivalent production."

An earlier scoping study into Hillside's development had estimated a cost of $650m-$800m. But that was for a smaller start than the full-blown development considered in the pre-feasibility study.

Hillside's expected cash cost of production (after gold and iron ore credits) is $US1.20 a pound of copper. Analysts estimate that, without gold and iron ore credits, cash costs would be more than $US2 a pound. That compares with the current price for copper of $US3.52 a pound.

The study estimated that Hillside's annual average revenue would be $710m or $11bn over 15 years.

Operating cashflow before tax was estimated at an annual average of $240m or $3.6bn over 15 years.

Rex is aiming to have project approvals and financing completed in the second half of next year. Development could start in the first half of 2014, leading to first production in the second half of 2015. Its shares closed 1c higher at 80c yesterday.