Shares of Vancouver-based Baja Mining Corp. (TSX: T.BAJ, Stock Forum) climbed 37% to 35 cents after the company provided revised capital cost estimates for its Boleo Prokect in Mexico after Monday’s market close.
Baja notes that the slowing of the original construction schedule at Boleo has allowed it to take advantage of a reduced cost environment.
As a result of recent changes in world economic conditions, the company says it has “prepared an updated preliminary internal trending analysis of Project capital costs, showing a 12% decrease”, suggesting a revised cost estimate of US$767 million.
The revised number represents a reduction of over US$100 million from the company's April 2008 capital cost estimate of US$872 million, says Baja.
The company also notes that is has prepared a revised scope of work for the project, with the first tasks being the preparation of a revised independent capital cost estimate and revised project schedule, to be completed in the third quarter. Baja says development of the project is expected to restart following completion of the required financing.
Assuming a reduced capital cost of US$767 million, the after-tax net present value of the project, at an 8% discount rate, is estimated at US$682 million.
The company has US$40 million cash on hand.
On the company’s Bullboard, investornot said:
This is higher than I had expected which I am pleased with... Of course it does not say they will commit to any of the items for which savings will be achieved but the indication clearly is they plan to move forward. However, this stock is going to remain sensitive to the overall market mailaise and until all financing is in place and the project put back in full construction mode the price will remain depressed. Great time to accumulate but lots of other good stocks in a similar boat right now.