🕐02.09.09 - 04:15 Uhr

Mirabaud rates Rusina a speculative buy



MIRABAUD Securities LLP 21, St James"s Square UK - London SW1Y 4JP T +44 (0)20 7321 2508 F +44 (0)20 7930 4861
www.mirabaudsecurities.co.uk 1
1
Mining Research
1 September 2009 Mining Afternoon Thoughts
Mining Analysts
Alex Wood
+44 (0) 20 7866 0200

Richard Morgan
+44 (0) 20 7866 0201

Keith Watson
+44 (0) 20 7866 0247

Mining Sales
James Leahy
+44 (0) 20 7878 3410

Jonathan Colvile
+44 (0) 20 7878 3386

Nick Orgill
+44 (0) 20 7878 4172

Keith Dowsing (European)
+44 (0) 20 7878 4162

Energy Analysts
Richard Savage
+44 (0) 20 7866 0098

Tim Hurst-Brown
+44 (0) 20 7866 0092

Alex Martinos
+44 (0) 20 7866 0212

Energy Sales
Pav Sanghera
+44 (0) 20 7878 3380

Harry Baker
+44 (0) 20 7878 3401

Sales Trading
Lucas McHugh
+44 (0) 20 7866 0085

Rusina Mining - Acoje studies point to a future low-cost nickel supplier
(RMLA LN, 4.63p, Mkt Cap.

£11.4m - Speculative Buy, valuation 37.6p)
Rusina and its partners remain focused on plans to deliver a 24,500tpa nickel heap-leach project at
the Acoje project, Luzon Island, the Philippines.

The suspension of its direct ship operations (DSO)
was to be expected with the fall in the nickel price.

Despite the recent rally in prices we see limited
activity at the DSO in the immediate term.

Rusina"s local partner, DMCI, has decided to sell its
interest in Acoje (8% economic interest and 20% in Zambales Chromite Mining Corp.

which has a
further 12% interest in Acoje).

A new local partner, Montemina (a minority owned, related party of
Rusina) will undertake an IPO in the Philippines and proposes to acquire these interests as well as
DMCI"s interest in the Santa Cruz port, built to service the Acoje project.
Rusina valuation - sum-of-the-parts
Value p per share
DSO - DCF (10%) (JV with DMCI) Not valued at this stage -
Ferronickel smelter (JV with DMCI) Not valued at this stage -
Heap-leach potential - 50% probability US$147.2m 37.0
Chromite, PGM & nickel mineralisation - Acoje project Not valued at this stage -
Sodaco (Tampakan) and other exploration activities Not valued at this stage -
Net cash at 1 September 2009 A$3.0m 0.6
Rusina valuation 37.6
Rusina - current share price 4.63
Source: Mirabaud Securities estimates spot US$1.62:£; long-term A$:US$ 0.70
• The other key partner participating in the Acoje heap-leach project is European Nickel (ENK
LN).

ENK recently paid a further US$3.33m for another 10% stake, taking its interest to 20%.
ENK brings strong technical expertise to the on-going studies.
• On a 100%-basis, and using the company"s assumptions, the prefeasibility study over ten
years derives a project NPV (10%) of US$375m, with an IRR of 28.3%, and a three-year payback
period.

Capital costs of US$498m for 24,500t per annum nickel production offer an
attractive US$9.22/lb capital intensity, with operating costs net of by-products and refining
charges (25% of nickel price) of US$3.10/lb.
• The China Tianchen Engineering Corporation (TCC) recently recosted the prefeasibility study
and believes that Chinese construction and material costs could reduce the capital costs by
some 15%.

It will commence a full definitive feasibility study for the engineering in October,
requiring approximately nine months to complete.
• Utilising our house forecasts for nickel and cobalt (US$10/lb) and a cost base that rises at
2.5% pa we derive an NPV (12%) on a ten-year (100%) basis of US$452.3m.

If we extend
the mine to 21 years, utilising the total resource available, that figure rises to US$806.6m.
• Rusina will retain 40% ownership of this project and applying a 50% probability of success
the ten-year life-of-mine is worth US$83.4m and on a 21-year basis some US$147.2m.

In
terms of value per share, this is equivalent to 21.0p and 37.0p, respectively.

At a price of
4.63p and with a positive prefeasibility completed, we rate Rusina as a Speculative Buy.
• Permitting for the Acoje heap-leach project is anticipated to be completed by end-2009.
MIRABAUD Securities LLP 21, St James"s Square UK - London SW1Y 4JP T +44 (0)20 7321 2508 F +44 (0)20 7930 4861
www.mirabaudsecurities.co.uk 2
2
Heap-leach - progress
In late November 2008 Rusina and European Nickel announced a positive prefeasibility study for a
nickel acid heap-leach operation at the Acoje nickel-chrome project, based on Luzon Island, in the
Philippines.

The study shows an economically viable project using a nickel price of US$6.00/lb
(spot nickel currently US$8.38/lb).

The initial life-of-mine was given as ten years, but the resource
is more than capable of supporting a ~21 year life-of-mine, and further infill drilling at Acoje and
further work at the neighbouring Zambales Chromite deposits will allow for this predicted longer
life-of-mine to be confirmed.
Acoje project - site location, south west Luzon Island
Source: Rusina Mining
The current JORC-compliant indicated resource (limonite and saprolite) is 34.41Mt grading 1.09%
Ni.

The inferred and indicated resource stands at 50.14Mt at 1.06% nickel at a 0.8% Ni cut-off
grade.

The Acoje study is based on just 30.8Mt at 1.12% Ni and 0.05% cobalt (0.9% cut-off in the
shallower limonite and 0.8% in the saprolite) offering the ten-year initial life-of-mine, but clearly
the project has a great deal more resource to provide.
The project has been designed at 3Mtpa throughput.

Metal recovery from heap to solution and
then solution to final product is ~74% for nickel and 64.5% for cobalt.

There will be two
precipitation stages to produce mixed hydroxide products - a primary nickel product (39% Ni and
1% Co) and a secondary nickel product (25% Ni and 1% Co).
Both products are expected to command prices equivalent to 75% of the contained nickel metal
value and 35% of the contained cobalt value.

Planned nickel production would be 24,500tpa with
930t of cobalt.

Estimated cash costs are US$1.60/lb net of by-products and US$3.10/lb if one
includes the refining costs (25% of the nickel price).

The total capital requirement is US$498m
(including US$45m working capital) and equates to a capital cost per annual pound of nickel of
US$9.22, a competitive level.
Our long-term nickel price remains US$6.50/lb despite the recent improvement in the price, and we
continue to believe that the US$6.00/lb figure used by the company in the prefeasibility study is an
acceptable level to base a bankable feasibility study on.
Importantly, based on Filipino economic laws, the processing stage will sit within a Special
Economic Zone (SEZ), enjoying a six-year tax holiday and a corporate tax rate of just 5%
thereafter.

The mining stage will pay a corporate tax rate of 32% and sit outside the SEZ.
MIRABAUD Securities LLP 21, St James"s Square UK - London SW1Y 4JP T +44 (0)20 7321 2508 F +44 (0)20 7930 4861
www.mirabaudsecurities.co.uk 3
3
Heap-leach flow sheet
Source: Rusina Mining
On a 100%-basis, and using the company"s assumptions, the ten-year project NPV (10%) is
US$375m, with an IRR of 28.3%, and a three-year pay-back period.
Utilising our house forecasts for nickel and cobalt (US$10/lb) and a cost base that rises at 2.5% pa,
we derive an NPV (12%) on a ten-year basis of US$452.3m and if we extend the mine to 21 years
that figure rises to US$806.6m on a 100% basis.

Currently, we assume in our model that Rusina
funds its share of capex from debt, but the company will analyse its funding options once the
definitive bankable feasibility study is concluded.
The initial ownership structure saw European Nickel, currently with a 10% stake in the project,
earning a 40% stake by spending US$10m on metallurgical heap leach trials, design and
permitting.

Rusina would be left with a 40% share and DMCI (Philippine partner) would have the
remaining 20%.

Assuming a successful acquisition, ownership of DMCI"s stake will transfer to
Montemina.

The plant will be based on the design European Nickel has planned and piloted at its
Caldag project, in Turkey.
Thus, based on Rusina"s projected 40% ownership of this project and applying a 50% probability
of success, the ten year life of mine is worth US$83.4m and on a 21-year basis some US$147.2m.
In terms of value per share, this is equivalent to 21.0p and 37.0p, respectively.

Against a current
share price of 4.63p per share, we continue to view Rusina as a Speculative Buy.
Current status
The heap leach trials will begin shortly.

The 3,000t of laterite ore that will be tested has been
crushed and stacked in its first 3-metre-high pad.

A delay has occurred, with the original
contracted crusher unable to deliver the specified size and dimensions required.

European Nickel
will provide a rolls-crusher from the Caldag project (Turkey) to enable the correct specifications to
be delivered, but this has resulted in a two month delay.
The China Tianchen Engineering Corporation (TCC) has recently recosted the prefeasibility study,
and believes that Chinese construction and material costs could reduce the capital costs by some
15%.

It will commence a definitive feasibility study for the engineering in October.
MIRABAUD Securities LLP 21, St James"s Square UK - London SW1Y 4JP T +44 (0)20 7321 2508 F +44 (0)20 7930 4861
www.mirabaudsecurities.co.uk 4
4
Environmental permitting for a full-scale heap leach project is in motion, with the Environmental
Impact Assessment already submitted.

All permits for construction are due to be completed by
November 2009.
Direct-shipping operations - remain suspended
Rusina will remain focused on the heap-leach potential of the Acoje project.

The direct-ship
operation (DSO) was always run as an immediate cash-generation activity, which would generate
cash flow whenever the nickel price allowed the DSO to sell to the pig iron industry.
The fall in the nickel price from ~US$50,000/t in May 2007 to a low of US$9,050/t in December
2008 was emphatic.

The recent improvement in the nickel price to US$18,450/t has led to some
limited interest in higher-grade (>2% Ni) material, but for the lower-grade material the market
remains closed.

The interest is not purely based on nickel grade alone, with pig iron producers
looking for direct-ship material with as high an iron (Fe) content as possible.

As these producers
pay for the nickel content, the higher the Fe content the higher the level of free iron they are
receiving.
On 3 July 2009 the company announced that its Philippine partner, DMCI had suspended its
current operations at Acoje due to the lower nickel price and despite the recent rebound in nickel
prices.

DMCI had been operating a direct-ship business, which at the height of the nickel price
was targeting three, 50,000t, shipments per month.

Had nickel prices remained at >US$20,000-
25,000/t then this short-term business may well have maintained some shipments.
Since June 2008 the project has shipped a limited tonnage, effectively clearing stockpile from the
port.

At the start of July, the price paid for DSO material was barely covering costs and despite a
further US$3,000/t improvement in the nickel price we would suggest the only material still likely
to find a market will be the small pockets of material grading >2% nickel.
Acoje is located just two shipping days from China, the value of which should not be
underestimated, despite the lower-cost shipping environment.

Rusina has enjoyed a free-carry on
the DSO with DMCI financing all aspects of the construction in return for its 50% interest for the
first 5Mt of production.

With power and transport costs falling, a nickel price of >US$16,000/t had
been envisaged as the level at which higher-grade material might be sourced by the pig-iron
producers (blast furnace), but the lower level of iron content in the group"s limonite means pig iron
producers are unlikely to seek this material.

Material above >2% nickel may find a home in Japan,
but on a sporadic basis.
Plans by partner DMCI to construct a ferronickel plant are now on hold.

In addition to the DSO,
DMCI had also wished to construct a ferronickel plant, supplied by Acoje.

Rusina had negotiated a
free-carry to a 40% interest in this potential 9,000-10,000tpa ferronickel smelter (initially
producing an intermediate product).

DMCI may continue to assess the intermediate (calcining ore)
product option and the associated coal carbonisation potential of the group"s Semirara coal which
would be associated with this project should it progress.
MIRABAUD Securities LLP 21, St James"s Square UK - London SW1Y 4JP T +44 (0)20 7321 2508 F +44 (0)20 7930 4861
www.mirabaudsecurities.co.uk 5
5
Summary valuation
Rusina"s policy has always been to broker deals that allow partners to earn into projects allowing
Rusina a free-carry and low cash-burn.

The company"s burn rate is now just A$250-300k per
month despite progressing a major heap-leach project towards a definitive feasibility decision.
At the end of the June 2009 quarter the company had A$3.0m of cash with a further A$0.55m of
receivables.

Recently, European Nickel has paid US$0.45m to Rusina and with no debt and cashburn
of A$250-300k per month the company is meeting its commitments.

Where progress may be
held up is with the funding from other partners.

Montemina will seek finance to complete its
acquisitions of the DMCI interests while European Nickel is still awaiting payment from the
Chinese group, JXTC, to complete its placement.
Our valuation for Rusina stands at 37.6p per share and we recommend the share as a Speculative
Buy.

We value Rusina"s share of the heap-leach project (both Mining Co and Process Co) at
US$294.4m, equivalent to 74.0p per share on a fully diluted basis, but apply a 50% probability to
this figure to account for the fact that this is still at the bankable feasibility stage and requires a
funding commitment.

We include no additional value at this stage for the other mineralisation at
the Acoje deposit (nickel sulphides, PGM and chromites), or the company"s interest in the Sodaco
property (early-stage copper), situated within the Tampakan FTAA boundary.

The only other input
to our valuation is a small net cash position of 0.6p per share.
Rusina valuation - sum-of-the-parts
Value p per share
DSO - DCF (10%) (JV with DMCI) Not valued at this stage -
Ferronickel smelter (JV with DMCI) Not valued at this stage -
Heap-leach potential - 50% probability US$148.5m 37.0
Chromite, PGM & nickel mineralisation - Acoje project Not valued at this stage -
Sodaco (Tampakan) and other exploration activities Not valued at this stage -
Net cash at 1 September 2009 A$3.0m 0.6
Rusina valuation 37.6
Rusina - current share price 4.63
Source: Mirabaud Securities estimates spot US$1.62:£; long-term A$:US$ 0.70
RECOMMENDATIONS HISTORY
Market index FTSE AIM Basic Resources
Date Market
Index
Stock Price
(p)
Valuation
(p)
Opinion
Rusina Mining
05-Jul-07 7,130 24.25 38.00 Buy
03-Dec-07 6,992 15.00 32.00 Buy
17-Mar-08 7,505 10.50 35.20 Buy
18-Dec-08 1,787 1.63 29.30 Speculative Buy
01-Sep-09 4,197 4.63 37.60 Speculative Buy
RATINGS, CERTIFICATION AND DISCLOSURE
RATINGS SYSTEM
BUY: The stock is expected to generate absolute positive price performance of over 20% during the next 12 months.
OVERWEIGHT: The stock is expected to generate absolute positive price performance of 10-20% during the next 12 months
NEUTRAL: The stock is expected to generate absolute price performance of between 10% positive and 10% negative
during the next 12 months.
UNDERWEIGHT: The stock is expected to generate absolute negative price performance of 10-20% during the next 12 months
SELL: The stock is expected to generate absolute negative price performance of over 20% during the next 12 months.
Risk Qualifier: SPECULATIVE
Stocks bear significantly higher risk that typically cannot be valued by normal fundamental criteria.

Investments in the stock may
result in material loss.
INVESTMENT ANALYST CERTIFICATION
All research is issued under the regulatory oversight of Mirabaud Securities LLP
Each Investment Analyst of Mirabaud Securities LLP whose name appears as the Author of this Investment Research hereby
certifies that the recommendations and opinions expressed in the Investment Research accurately reflect the Investment Analyst"s
personal, independent and objective views about any and all of the Designated Investments or Relevant Issuers discussed herein
that are within such Investment Analyst"s coverage universe.
INVESTMENT RESEARCH DISCLOSURES
The following disclosures relate to this document:
Rusina Mining (RMLA LN), 3 & 8
1.

This is a commissioned or a non-independent research note/comment.
2.

In the past 12 months Mirabaud Securities or its affiliates have had Corporate Finance mandates or managed or comanaged
a public offering of the relevant Issuer"s securities or received compensation for Corporate Finance services from
the Relevant Issuer, excluding acting as a corporate broker, on a retained basis, for the Relevant Issuer.
3.

Mirabaud Securities expect to receive or intend to seek compensation for Corporate Finance services from this company in
the next 6 months, excluding acting as a corporate broker, on a retained basis, for the Relevant Issuer.
4.

The Investment Analyst or a member of the Investment Analyst"s household has a long position in the shares or
derivatives of the Relevant Issuer.
5.

The Investment Analyst or a member of the Investment Analyst"s household has a short position in the shares or
derivatives of the Relevant Issuer.
6.

As of the month end immediately preceding the date of publication of this report, or the prior month end if publication is
within 10 days following a month end, Mirabaud Securities and/or its affiliates beneficially owned 5% or more of any
class of common equity securities of the Relevant Issuer.
7.

A senior executive or director of Mirabaud Securities, or a member of his / her household, is an officer, director, advisor,
or board member of the Relevant Issuer and/or one of its subsidiaries.
8.

Mirabaud Securities acts as corporate broker, on a retained basis, for the Relevant Issuer.
The Investment Analysts who are responsible for the preparation of this Investment Research are employed by Mirabaud Securities
LLP a securities broker-dealer.

The Investment Analysts who are responsible for the preparation of this Investment Research have
received (or will receive) compensation linked to the general profits of Mirabaud Securities LLP.
Copies of the Mirabaud Securities Policy on the Management of Material Interests and Conflicts of Interest in Investment Research
can be obtained from the Mirabaud Securities Compliance Department by emailing
DISCLAIMER
ISSUED BY MIRABAUD SECURITIES LLP, A COMPANY AUTHORISED AND REGULATED BY THE FINANCIAL SERVICES
AUTHORITY.

A MEMBER OF THE LONDON STOCK EXCHANGE
© Mirabaud Securities LLP.

All rights reserved.

Any unauthorised use or distribution is strictly prohibited.

This document has been prepared
and issued by Mirabaud Securities LLP or its associated companies and has been approved for publication in the United Kingdom by
Mirabaud Securities LLP, a limited liability partnership authorised and regulated by the Financial Services Authority.

This document is
distributed in Hong Kong by Mirabaud Securities (Asia) Limited, which is authorised as a licensed dealer in securities and regulated by the
Hong Kong Securities and Futures Commission.

Neither the information nor the opinions expressed in this document constitute or intend
to be an offer, or a solicitation of an offer, to buy or sell relevant securities (i.e.

securities mentioned herein and options, warrants, or rights
to or interests in any such securities).

The information and opinions contained in this document have been compiled from and based upon
generally available information which Mirabaud Securities LLP believes to be reliable but the accuracy or completeness of which cannot be
guaranteed.

All comments and estimates given are statements of Mirabaud Securities LLP"s or an associated company"s opinion only and
no express or implied representation or warranty is given or to be implied therefrom.

All opinions expressed herein are subject to change
without notice.

This document does not take into account the specific investment objectives, financial status, attitude to risk or any other
specific matters relevant to any person who receives this document and should therefore not be used in substitution for the exercise of
judgment by such person.

Neither Mirabaud Securities LLP nor any associated company accepts any liability whatsoever for any direct or
consequential loss arising from the use of its advice or research publications save where such loss arises as a direct result of Mirabaud
Securities LLP"s or an associated company"s negligence.

Research publications are issued by Mirabaud Securities LLP or an associated
company for private circulation to eligible counterparties, professional clients and professional advisers, ("its clients"), and specifically not
to private or retail clients.

They may not be reproduced, distributed or published by you for any purpose except with Mirabaud Securities
LLP"s express written permission.

Mirabaud Securities LLP, an associated company, or their employees and officers may have a holding
(long or short) in an investment which it knows will be the subject of a published research recommendation to clients.

It may also have a
consulting relationship with a company being reported on.

Mirabaud Securities LLP or an associated company may also act as agent of its
clients and may have or have undertaken transactions in investments covered by this document prior to your receipt of it.

Additional
information on the contents of this report is available on request.

Not for release, publication or distribution, directly or indirectly, in or into
the United States of America.




Products & Services | Jobs