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They look to be the almost the same sellers as CEN is seeing (MacQuarie in particular), which is another significantly undervalued Thai junior. A merger btw CEN and POE would be a great combo imo. CEN has big reserves (40MM boed 2P), excellent exploration upside and a nice near term production ramp. POE has great cash flow but smaller reserves. Put em together and you'd have a ~30,000 boed company in the next 18 months with a strong balance sheet, great reserves and nice exploration upside.
Falcondo closed? This is big news. Falcondo is one of the biggest Ni producers around. But they get power (one of their biggest expenses) from crude, so their costs must have skyrocketed this year.
Nord - finally the news the market wanted. And no buying interest. This market is unreal.
NGG - all these mines need time to get the kinks worked out. And in PNG, kinks take longer to fix due to remote location. I think they eventually get them taken care of, but like anything, costs go up, and delays occur, lowering the value of production.
Honestly, nobody should expect "as planned" production from start up mines, whether big or small. If they meet or (heaven forbid) exceed production, it's time for rejoicing. But even plays that exceed guidance aren't given any joy in this market.
Compare Nord to Zaruma:
Nord mc = $28MM and is fully funded to 25MM lb/yr production. Also has current production from existing heap leach.
Zaruma mc = $27MM and still needs another $10-$15MM to fully fund their 15MM lb/yr mine.
Nord has 17 yr mine life brownfield operation. Will expand to ~35-45MM lbs/yr in the next few years.
Zaruma has 5-7 yr mine life with no infrastructure as it is a greenfield. Expansion is unlikely.
Nord is in Arizona. Zaruma is in Mexico.
Sprott owns ~20% of Nord via participation in their $0.75 PP last summer.
Current $0.40 share price for Nord is a steal imo.
Coastal Energy (CEN.V) - This is a sleeper play just about to take off with a large drilling program and production increase. Will drill more than 40 wells in the next 18 months offshore Thailand starting in August. Using a new build barge mounted rig suitable for the 40-60' depths and shallow wells (8000'). Expect to drill one well every two weeks or less, so big news flow about to start that won't let up for a long time (also have an option for another year on the rig, which I expect them to exercise).
They are a current 12MMcfd producer that provides modest cash flow (although the field they are producing out of has multi TCF exploration potential - the problem is lack of export pipeline that would allow large production. As such, they are going slowly).
The real asset is their offshore oil fields that are about to be put into production by year end. First field will bring on ~5000 bpd and second field another 5-7000 bpd mid '09, so strong cash flow about to start. With decent exploration success, they are hoping for 20,000 bpd in 2010.
The most appealing thing (besides ultra cheap valuation and a Top Pick from a few analysts) is their 8 nearby look alike structures in close proximity to their proved offshore oil fields. Not huge fields (5-20MM bbl recoverable), but very close by (~0.5-2 km) to their platforms and are highly prospective. CEN suggest 75% COS success based on their review of the recently shot 3D seismic. That's extremely high confidence level and suggests as many as 6 discoveries.
Since the fields are in shallow water, they have low capex (unlike North Sea plays) and can quickly get the wells into production (in a matter of months vs years). Recently bought a tanker and are converting to a Floating Storage and Offloading vessel.
Current price is back to their $3.50 IPO - was trading as high as $4.80 just a few months ago - absolutely no news to warrant the sell off, other than a lousy market and a lack of news.
CEN is cheap on standard metrics. Has 40MM bbls of 2P reserves, mostly oil, with a pre tax NPV at 10% of $1.4 B. (~$15/share). Current mc is around $330MM. (94MM shares os, ~6MM options and only a couple million warrants around $5.50)
With their big drill campaign just about to start, I think CEN is table pounder. If they have a fraction of the success they are expecting, the market should really like the story (who doesn't like drill results every two weeks for the next 18 months that target known oil fields and highly prospective look alike targets?).
Most analysts have $7 targets based on low oil prices and production at the low end of guidance. I have higher expectations.
GORO - really nice widths and grades! 5m width is outstanding for ~1.45 ounce per tonne. Also hit 3m of 2+ opt ore.
$1300-$1800 tonne rock at really, really wide widths. No chasing narrow veins and suffering lots of dilution as one typically sees.
Cash costs have to be around $100 an ounce for El Rey, even with trucking costs and smaller production. Hopefully, the find long veins to follow.
TIV - $100MM cash flow? No way. They only have 25% net production. At 2000 boed gross, they are finally cash flow positive.
If they get to 3000 boed by year end, their net production is around 750 boed.
Assuming $90 netbacks, that's $25MM/yr cash flow. Slap a very generous 4x multiple and you get a company worth $100MM market cap.
Their financials are a mess.
At current prices, TIV is grossly over valued.
POE - please give a quick synopsis of why to buy.
I am considering Coastal (CEN) and POE. Leaning towards CEN due to big production ramp and drilling campaign, but feel I might be missing part of the story on POE.
TIA
IAE - Bob, one can't go around pounding a table when one is still building a position and putting friends and family into the play. I just filled up on Monday upon receipt of comments from the CEO and family was buying as late as Wednesday - I had no clue END was gonna make an offer and would have much preferred they didn't as I think it is extremely opportunistic.
Buying at current prices is still great value. Right now, nimrods are taking a quick 30% gain and leaving the biggest upside on the table. In this market, not surprising.
But I am not suggesting IAE for a trade. I am looking at late 2010 when they are at 30,000 boed. By then they'll be generating close to $90MM in cash flow a MONTH. Current $340MM mc is a fraction of where it will be in a few years assuming IAE doesn't get stolen before it gets a chance to morph into a butterfly. For comparison's sake, OIL is producing 20,000 boed and carries a $3B mc with hundreds of million in debt. IAE will have far less debt due to significantly higher oil prices. If OIL can generate a $3B mc with 20,000 boed, one can certainly see at least that valuation for IAE when they are producing 30,000. That's a potential 10 bagger from here.
Too late to buy IAE? NOT! Bob, you need to look a LOT closer at IAE.
END will never make this deal happen with their pathetic offer - it's laughable.
IAE is about to experience a huge production ramp starting year end. Going to exit 10,000 boed this year. Netbacks are well over $100 (significantly higher than END due to their hedged production in the $65 range). IAE should generate well over $300MM cash flow in '09, double what END will generate with similar production due to END's hedges. Yet even though IAE will generate 100% more cash flow, it carries less than half the valuation of END. The market has the valuations backwards.
Even with this modest pop (back to levels is was just a couple of months ago), IAE is dirt cheap, trading at a bit over 1x '09 cf. And carries a ridiculously low $45K EV per flowing boed valuation (the rest of the sector, including debt ridden, lower netback END, carries significantly higher valuations - like 2-3x higher).
IAE production will double again in late '09/early '10 to ~20,000 boed and then 50% more in '11 to ~30,000 boed. By '11, IAE could be generating close to $1B in annualized cash flow. Slap a 3-5x multiple and IAE will be a multi billion market cap company (just like Oilexco is now - $3B mc and lots of debt with 20,000 boed).
IAE's undervaluation is stunning considering current mc is $340MM with $50MM in cash and no debt (although they will need to take on $100MM debt to fund development of Jacky/Beatrice and raise $300MM for Athena. However, IAE will be throwing off so much free cash, they can lower the debt levels if they choose, or significantly ramp exploration and development drilling - either way, IAE will soon be valued multiples of current END offer).
IAE is THE cheapest North Sea player you can buy. And with near term wall of cash and significant production ramp, IAE is the horse to ride. Of all the NS players, END is the least interesting company to invest in. I'd take SE, AEN, SQZ and a few of the UK listed plays (Venture etc) over END any day.
Disclosure: IAE is now my largest holding. A month ago, I had a tiny position. Recent upward production guidance, acceleration of production, outstanding asset acquisitions made it a no brainer table pounding buy. And $3.25 is no where near an appropriate valuation. I expect IAE to triple from these levels over the next year. No way could one expect END to deliver similar returns due to their hedges and lousy debt/share structure.
SAM posted a minuscule profit. Giving em some increasing production results, I think they'll make less than $0.02 a share. Slap a 10 PE on them (high for an under performer with opaque management), they're fully valued at $0.20 a share. They're still overvalued 30% or so. SAM is a buy down in the low teens.
The lack of tailings permit throws a bit of wrench into their plans. They want to prestrip the open pit and use that material for the tailings pond. If the permit doesn't arrive in time, they could be sitting there with a completed mill and no production.
This PR is yet another in a series where they've started prepping the market for delays. Remember, they originally were yammering about starting up last year. They are highly unlikely to be in production this year.
But at least they have the mill permit. That is a big step - and no ministry is going to issue a mill permit if there is any real doubt about a tailings permit.
I just wish they'd come clean and admit that getting into production this year is next to impossible.
Check out Amazon Mining (AMZ). Has $0.40 in cash. About to release first drill results from their gold properties in Brazil. Run by Brazilians. Interesting spec.
IPO'd in Nov at $1.20. Trading $0.50.
Recent webcast: http://hosted.mediasite.com/hosted4/Viewer/?peid=16533a9dbdfb443abea3e5cf4d3b0e8b
U may have bottomed, but is there much upside? I think so many got burned that few will be interested in reentering the sector.
ATW - I think you pretty much nailed it Monty.
Looking at their properties, it is extremely likely they prove up additional resources. What I like is very low valuation, lots of cash, two complete mills in a good location and near term production.
Few juniors start out life with such advantages, or can be bought so cheap. Management has to prove they can mine the property as per their projections, so there is some risk. Many of their peer group have fallen flat on their face trying to do the same thing. What gives me confidence is that their first mine was running as recently as 2005 and they have hired the same manager back to run the operation (and I presume that's a good thing, lol).
US Global lives and dies by their 1 standard deviation metric and have been the top performing funds year after year. It's perhaps the one technical indicator that I believe in. You can bet your bottom dollar that US Global is selling their oil weighted positions heavily right now.
I would be too, if any of my junior oils had remotely followed the price of crude. Sometimes I really wonder how so many people can have chit for brains when it comes to investing in juniors. Oil goes up over 100% yoy and many of my oil plays have barely moved.
Moly Mines (MOL) starting to move. Up about 50% in the last few weeks and up ~100% from its recent lows a month ago. But still extremely undervalued. I have a ~$15-$20 target in 18 months. Currently around $3.30.
24MM lb/yr Moly mine with 27MM lbs/yr Cu by product. Cash costs are around $5 lb with current copper prices. 20-30 year mine life.
In talks with Asian steel mills and large mining companies to sell a stake in the project. Should be in late stage discussions right now. I'm assuming a 20% stake will be sold for around $150-$200MM. That cash infusion will virtually eliminate dilution to shareholders to fund capex. Already ordered all long lead time items, have a majority of the $1.1B capex under contract and have a large staff ready to move the project along. Is located in W. Australia and is the closest Mo deposit to Asian consumers.
The stock is in strong hands with big backers. Australia's richest man owns a big chunk (Andrew Forrest of Fortesque fame) along with Harbinger Capital (who owns 20%). Harbinger made a fortune investing in Fortesque and could easily reap another fortune with Moly Mines.
MOL will have the same size production in 18 months as Thompson Creek has now (but with $2-$4 lb lower cash costs depending on Cu prices). TCM carries about a $2.5 B mc, which is roughly 6x cf. Assuming 5x cf for MOL, that implies a similar $2.5B mc.
MOL suffered as they had to delay financing into H2 due to credit crunch. With an Asian mill on board (or even a major mining company), bankers will surely finance them as their IRR is very good for such a large mine (around 50% at current prices).
I consider MOL the cheapest play in the Moly sector by a large margin. It's been overlooked as it is an Aussie mine, while all the others are US or Canadian.
GORO - low volume pushing the stock, so no real conviction on the move. $20 stock is unrealistic without significant reserve additions to garner at least a 10 yr mine life. That said, if they show us more excellent intercepts, that's a possibility. But with 1 (and occasionally 2) rigs drilling, it will take years to drill up enough reserves.
As for getting into production this year, that's looking increasingly unlikely. In the recent PR's they've now got all sorts of qualifiers in their guidance "subject to timely permits, equipment, yada yada yada". If they don't get the permits by month's end, it will be virtually impossible to build the mill from scratch, commission it and get into production in 6 months. I am looking for late Q1 '09 start up assuming permits arrive soon.
The Reids have done an outstanding job of promotion. A lot of juniors would do well to emulate their PR efforts. Good drilling results help, but a good website, informative presentations done in a pleasing manner (good color scheme etc), and webcasts put them at the top of the class.
Well, down she goes....
That's the problem with one mine operations.
QUA - They didn't buy Carlota until Oct '05. In the purchase PR (below), they noted they still needed to get permits that were under appeal to the courts. They said they expected cstr to begin in '06 and start production in '07 (but that was clearly optimistic if you know anything about the US "justice" system). And at the end of the PR, they effectively hedged themselves by saying there may be "potential" production in '07. If you talked to management back in '06 (as I did), they fully acknowledged that '07 was "best case" scenario for Carlota and '08 was more likely. At the time, I was looking hard at both QUA and ML - ended up buying ML at $0.60 - I only wish I didn't sell at $1.
At most, Carlota could be consider being a year late - but that assumes one expected quick action out of the US court system - an unwise assumption imo.
Wed Oct 5, 2005
Quadra To Purchase Carlota Copper Project
Quadra Mining Ltd. (TSX: QUA) ("Quadra") is pleased to announce that it has signed a binding letter of intent with Cambior Inc ("Cambior") for the purchase of Cambior USA Inc., owner of the Carlota copper project ("Carlota") for a total consideration of US$37.5 million. Carlota is a development ready SX-EW copper project which could be brought into production in 2007. Based on a September 2005 NI 43-101 compliant Technical Report, the project is expected to have an eleven year mine life with an average production rate of approximately 66 million pounds of LME grade cathode copper per year. Included in the purchase price are ten used 190 ton trucks, one used P&H 2800 shovel and a solvent extraction plant.
Quadra has agreed to pay Cambior the following payments:
• On closing of the transaction, US$15 million in cash;
• Eight quarterly gold payments commencing on March 31, 2006 of 6,250 ounces of gold, representing in the aggregate US$22.5 million based on a reference gold price of $450 per ounce
An additional US$4.0 million in cash may be payable following an agreed-upon drilling program of approximately 3,000 meters to confirm the status of certain material currently included in the reserves of the Carlota deposit.
Quadra has entered into a commitment letter for a bridge loan facility (the "Bridge Facility") with a Canadian chartered bank in order to provide access to the funds necessary to pay the initial installment of the purchase price. The Bridge Facility is in the amount of US$15M, has a six month term, is secured by the assets of the company and will bear interest at LIBOR plus 3.5%. The Company may draw down under the Bridge Facility only upon entering into definitive agreements for the Bridge Facility, closing of the acquisition and on other terms and conditions typical for a transaction of this nature. Quadra intends to refinance this facility in the future, either through a project debt facility, new debt, or equity.
The acquisition is subject to finalizing a definitive purchase agreement acceptable to the parties, which will include a number of conditions typical for a transaction of this nature.
All primary permits related to the Carlota Project have been approved. Additional normal course approvals within the permit system are required in order to commence development. Two of the existing permits are subject to final appeals court litigation and the final four quarterly gold payments may be deferred if Quadra can not begin construction by the first quarter of 2007.
Carlota is a primarily oxide copper deposit, located in the historic Globe/Miami mining camp in Arizona. Mining will be by open pit. Run-of-mine ore will then be heap leached and the solutions processed in an SX-EW plant to produce LME grade cathode copper at the mine. Construction of Carlota is expected to commence in 2006 with first cathode production in 2007. Currently, Quadra operates the 38,000 tonne per day Robinson Mine in Nevada where it expects to produce 120-127 million pounds of copper in concentrate form and 75,000 ounces of gold in 2005.
Quadra expects many positive benefits to its shareholders from the acquisition of the Carlota Project.
• Near term production growth
• Lowers cash cost profile
• Increases copper leverage
• Diversifies from single mine status
• Production of cathode eliminates exposure to smelters and refining charges and reduces transportation costs
• U.S. produced cathode should attract a premium to the LME copper price
• 100% US$ denominated cost exposure provides a natural currency hedge
• Strengthens Quadra's position as a leading mid tier copper producer
Bill Myckatyn, CEO of Quadra, said "We are very pleased to have reached an agreement on the Carlota project, which is an exact fit to our strategic growth plan and plays to our strengths of mine development and operations. Cambior has worked hard over the years to bring Carlota to feasibility and to line up the necessary permits and we anticipate moving rapidly forward to construction with potential production in 2007. A further benefit to Quadra is that the project is located in the western United States, potentially offering a number of synergies with the Robinson Mine in Nevada. "
The Carlota Technical Report was prepared by Independent Mining Consultants, Inc. ("IMC") of Tuscon, Arizona during September 2005 in accordance with NI 43-101. Mr. Mike Hester of IMC is a Qualified Person and is 'independent' of Quadra as defined by NI 43-101. The Technical Report is based on the 2005 Carlota Project Final Feasibility Study which utilizes data from both the 1996 Carlota Final Feasibility Study and the 2003 -- 2004 Feasibility Study conducted by Carlota and BHP Copper to consolidate the adjoining Carlota and Pinto Valley mine sites. The Technical Report provides a detailed review of the Carlota project as a stand-alone project as of January 2005 to justify a production decision. Mr. Mike Hester has reviewed and approved the content of this press release. The NI 43-101 Technical Report will be available at www.quadramining.com and at www.sedar.com.
QUA- Earnings will simply be stellar for QUA - under normal circumstances, I'd be like you and sell before earnings are announced as well. But this quarter will still surprise a lot of people. They hit on every cylinder in Q1. I think the analysts will be forced (embarrassed?) to take their numbers higher, especially as most of the cowards, err, "experts" are still using sub $3.50 Cu prices this year. And remember, QUA has a relatively big short position - over 2MM shares from all the "smart money" - those guys all have to cover - they tried a bear raid last week, but that couldn't hold when problems from Codelco and Grupo and DRC reared their ugly heads yet again. Unless QUA disappoints the market somehow, those 2MM shares are gonna keep the upward pressure on the stock.
I don't know where you got the idea that Carlota was delayed two years. Per management, they still expect start up by end of the year. Higher acid costs yes. But vastly higher copper prices too. Nor is Carlota in the "experts" numbers as yet. Another 70MM lbs with ~$1 cash cost for cathode that will get a premium to LME spot. Say $3 margin x 70MM lbs = $210MM cash flow. Easily over $100MM added earnings. If current prices continue, QUA could earn over $400MM in '09. At current valuation, that's a PE of 3.5x... I think QUA could double from current prices - more if a take out is in the offing.
Guy - I have much higher expectations for FMA.
Personally, I'd never bother investing if I thought there was only a 30-50% upside in any junior (when it gets to those levels, that's when I am trimming my position). I have about $0.85 average and if it doesn't hit $2+, I will be mightily surprised and disappointed.
FMA is cheap, but so are many others. I really like Globestar - reasonably cheap on a CF basis (about 1.8x '09 cf), but you also get the Ni for free (and the Ni is worth more than the Cu assets). When they finally make a deal for the Ni, it could really move.
Nord is also looking very appealing. I wish there was more liquidity though - very hard to build up my position in the low $0.80s like I want.
The problem with juniors is simply having the patience for the market to wake up.
I had the same thinking - took some of those juicy ZMR profits to work in Nord and FMA.
But I still have 70% of my ZMR - am holding most until they get to my $1 target - chart is overbought, but the play is cheap, so it could easily consolidate at these prices. The warrant selling seems to have vanished (amazing how these stocks respond when moronic institutions stop bailing absurdly cheap shares).
I really want to see some consolidation in the sector. The juniors are trading at a tiny fraction of where they should be valued - they need to bulk up and get some attention from serious investors (and not the POS that "invest" in juniors and flip warrants with abandon and crush the stocks they supposedly are out there "investing" in).
Lone - good info - looks like the best of the bunch is Metals X (MTX.AX). Just about to bring on a large tin mine in Australia in a few months. http://metalsx.com.au/
Not inexpensive, but they also have a pretty large laterite Ni deposit and Jinchuan owns 14% of the company.
At current Sn prices, could throw off $200Mm in cash flow in '09.
Currently have 1.1 B shares os and ~A$0.40 share price.
CS - want to buy in NA? Hmmm. I guess Pescod's idea of a merger with GMI isn't in the cards (GMI has their mine in the Dominican Republic).
I wonder if they'll kick Nord's tires again? They bought a few shares of them last year.
Nord is extremely undervalued - their mc is less than half the cost it would take to build their SXEW facility. And you get a 17 yr mine life plus significant mine life upside based on what the recent drill results indicated (that their two pits are connected and open on strike each direction). Once Nord gets the Air Quality permit snafu straighten out and build the expansion, the shares should move significantly.
GORO - At current prices, a modest sized placement would be needed - ~1MM shares (~$5MM) would give em plenty of cash for a decent drill campaign at such shallow depths.
You suggest that a "non compliant" resource won't give em any special multiple - I agree 110% - that's EXACTLY the problem. However, management blithely goes on about getting a fat premium for low cost production - GORO won't get any of that premium without a large, compliant reserve.
And getting another drill (or three) would help the news flow (especially as there is likely to be a delay in getting into production once again), plus target some of the very interesting areas like Cerro Colorado. I see little downside with such an approach and considerable upside if the drills find more high grade mineralization (which I think is highly likely).
Goro - good presentation. But I didn't like the tone about getting into production by year end. He tried to sound optimistic, but I sensed he had his doubts. They still need the mill permits and have to mobilize the contractor. Even if they get the permits tomorrow, it will take a few months before they can start. Building a mill in 6 months and hot commissioning will be a very big task. I think late Q1 '09 is more realistic assuming the permits come soon.
I sure wish they'd get more drills out at that site. So many juicy targets and so few assays. How can they not drill out Cerro Colorado in an aggressive fashion? Another open pit 3x the size would be outstanding - give them the ability to really spend the time working up a good mine plan on the UG - from the looks of things, the UG could be a much bigger mine than 850 tpd.
Re:ATW - I don't know what the catch is other than aggressive selling by $0.80 warrant holders,
Across the sector, institutions are dumping shares and only holding warrants. Many Funds are seeing redemptions and selling shares to raise cash. Holding virtually risk free warrants at little or no cost is good business, but destructive to other shareholders (if you have a higher cost basis).
I think ATW is very good value at current valuation. The presentation enlightened me as to the underground potential. Widths and grades are very good for low cost UG mining. 3m is minimum width for low cost UG mining without dilution. ATW seems to be averaging 6m widths which is excellent.
My concern is that they continue to buy other mines and lose focus on getting into production and cash flow. But I have to admit their buys have been very good. The first mine literally was stolen. They'll recover the purchase cash cost in 4 months at current prices.
No need to chase the shares - they won't be in production until October and we have the summer doldrums coming up.
ATW Ventures - listen to this webcast. I think the story is outstanding and the value is excellent.
55MM shares. $0.80 = $44MM mc with $16MM cash and own two mines with modern mills. Going to produce over 100K ounces by 2010. Will be starting up first mine by Oct and produce 42K opy. Are in late stage discussions to buy additional mines.
http://www.visualwebcaster.com/EQUITIESMAGAZINE/46858/reg.html
FMA - stunning economics.
Had 1435 tpd mined (1355 tpd milled) in March, but were still tweaking the Horne Mill. Should get to 1500 tpd average design capacity in April.
Assuming $3.90 Cu and $1.38 cash cost = $2.52 lb cf x 1.9MM lbs in March = $4.8MM cash flow. Should see ~$5+MM mo at full production (starting this month). And the 1.9MM lbs was low as it was based on 42000 tn milled vs the 44,500 they mined.
If Cu prices hold, FMA could cf well over $50MM this year, or well over $1 share (now have 42.75MM shares os).
FMA is a table pounder at current $1.10 share price.
FMA - they have a year to get the second mine into production - it's only ~1km away from the existing workings, so easy access.
And with 1.5% cutoff, they are leaving plenty of economic ore in the ground at Fabie, so have the potential to continue mining at Fabie should they encounter start up delays with Magusi. With ~$4-5MM a month in cash flow, FMA will be flush with cash and can afford to accelerate the development of Magusi if need be. Management told me they expect ~$6-8MM in capex at Magusi before it will be self funding (and that was using $2.50 Cu as their base case).
Fabie should have more ore than in their reserves anyway - they didn't bother drilling Fabie before restarting production. In the past, the previous operator wasn't interested in anything other than relatively high grade ore as it wasn't economic at ~$0.90 Cu. At $4 Cu, there is substantial ore that has been bypassed.
Their current mine plan is essentially high grading the deposit, as the limiting factor is the 1500 tpd mill. I'm sure they would have lowered the cutoff significantly had they been able to process more ore thru the mill. Lower grade could easily be offset by higher tonnage.
I think the worst case scenario is they mine lower grade ore for a few months at Fabie if they encounter delays at Magusi.
As such, I think the market is overly worried about the potential start up delays at Magusi and offers excellent value. When I compare FMA to Zaruma, I wonder why I keep Zaruma at current valuations. FMA is 2-3x the company with lower EV ($40MM EV vs $50MM EV) and is generating big cash flow now, not ~12 months away (will take ~3 months for ZMR to generate first cathode).
The more I think about FMA, the more I am inclined to keep adding to my position.
FMA - 43-101 released. Great news.
FIRST METALS OBTAINS UPDATED NI 43-101 REPORT ON FABIE BAY MINE
First Metals Inc. has received its updated National Instrument 43-101technical report on the Fabie Bay-Magusi property, near Rouyn-Noranda,Que.
The report confirms that the Fabie deposit contains a mineral resource (measured and indicated) of 592,300 tonnes averaging 3.02 percent copper (Cu), at a cut-off grade of 1.5 per cent copper. This has been converted to a mineral reserve of 601,000 tonnes averaging 2.83per cent Cu at a cut-off grade of 1.5 per cent Cu which includes allowances for mining extraction and dilution (proven -- 396,000 tonnes at a grade of 2.90 per cent Cu and probable -- 205,000 tonnes at a grade of 2.69 per cent Cu). The report, prepared by Scott Wilson Roscoe Postle Associates Inc., will be filed on SEDAR and will also be posted on the company's website.
Using a $3-(U.S.)-per-pound base case, the Scott Wilson RPA report concluded that the project was profitable. At current copperprices of approximately $4 (U.S.) per pound, Fabie's total cash cost of$1.38 (U.S.) per pound of copper (mining transportation and milling)makes this a highly profitable and robust operation.
First Metals chief executive officer, Richard Williams, noted that while processing of copper material was initiated in late November of 2007 on a test mining basis, the review carried out by Scott Wilson RPA serves the dual purpose of an independent audit of the mining and milling operations, and also makes the operations fully compliant with the National Instrument (NI) 43-101 regime. By having an independent verification of the mineral resource, and the costs associated with the production and processing of the ore, management is now able to publicly speak of ore, revenue, earnings and profitability.
Charles Gryba, PEng, First Metals chief operating officer and vice-president business development, is the qualified person under NI43-101 who has verified and approved the technical content of this release.
First Metals has brought the Fabie copper deposit into production in 19 months and is now planning the development of the Magusi copper-zinc-gold-silver deposit near Rouyn-Noranda.
Codelco - it's criminal how badly they are treating the non unionized workers that are used by labor subcontractors - they do they exact same job as the unionized guys, but only get a fraction of the pay. With $4 Cu, that's reprehensible.
Codelco is the biggest Cu producer in the world. Last year their average cost of production was $1.47. This year, I suspect it will be closer to $1.70 lb. Yet the friggin "analysts" still are using $1.50 as the "marginal" cost of production. Hell, if the biggest producer in the world has $1.70 costs, the true marginal cost is probably around $2.25-$2.50 and that's where these so called experts will be in not too distant future. That means valuations and target prices have to rise substantially as the "experts" get dragged kicking and screaming into the present - they are 3 years behind reality right now.
El Teniente is the biggest U/G mine in the world. With the other two Codelco mines out of production, we will soon see big inventory draws.
FMA - I talked to management a few weeks ago using the same line of logic. He said 2MM lbs/mo was the expected run rate at full production - he wasn't able to explain why current grades x tonnage didn't equate to much higher production as the numbers would otherwise indicate. I suspect that dilution lowers average grade when running at full capacity of 1500 tpd.
Cash costs are expected to be in the $1.80 range. With $3.80 Cu, that's $2 lb cash flow.
They are unhedged and should be throwing off ~$4MM a month cash flow.
FMA should throw off well over $40MM cash flow this year. That's outstanding for a play with a $40MM mc.
GCU's economics are likely to be modest at best. For all the hype about the "biggest" Ga/Ge deposit in the US, it ain't true.
SRZ is expected to be the biggest Ga/Ge producer in the world by 2009 (when they install a recovery circuit on the mill) and it's all by-product from their zinc mine in Tennessee that is just being ramped up to 7,500 tpd and to 100MM lbs zn this year (140MM lbs in '09).
If you like Ga/Ge, SRZ's currently woefully low share price (due to several unexpected recent financings) is far and away the best way to play them imo.
47MM share os. 55MM fd. Are a relatively high cost zn producer without the Ga/Ge credits, but should be solidly profitable with them.
I owned SRZ last year and sold in the $6 range pre production. Now, $1.75 and in production, well below their May '07 IPO.
SRZ is a perfect candidate for bottom fishing imo.
Monty, it makes little difference what the grade of the ore is as long as they can mine it profitably and the shares present good value. Barrick makes a killing in Peru mining 0.78 gpt gold. Many UG mines barely make a profit with 5 gpt. It all depends on their cost structure.
They bought a $50MM mine complex for $7.5MM (half with warrants at $0.80, so they get half the money back - for current investors, that's a sweet deal).
They will be producing 40,000 oz from the first mine starting in Q3. Opex is will be relatively high, but capex is astoundingly cheap (no mill to build, no UG development needed, no infrastructure etc etc), so total costs are good.
The property was mainly mined for the surface oxide ore, and only recently were they going underground. They say it can be ramped to 60-80K in a few years. From what they say, the ground was barely drilled below 85m and in the type of system they are in, grade typically increases with depth. I think they've barely scratched the surface exploration wise from what I see in the pics.
And they recently bought another past producing mine and mill and hope to have it up and running in '09 adding another 40K oz.
55MM shares os x $0.78 = $43MM mc with $15MM in cash.
With 40,000 oz, $900 POG and ~$500 cash cost, that's $400 margin x 40,000 = $16MM cash flow. Trading at 3x cf for a gold producer. Should trade around 10x - and that's just based on one of the two mines.
They aren't hedged, so it all flows to the bottom line. Shouldn't need any more equity.
I see ATW as a no brainer. Maybe not a barn burner investment, but this kind of play is right up my alley - low risk, cheap and in a good safe location with all infrastructure in place ready for rerating.
Oh, and I forgot Sprott just took down 13% of the company on a fd basis in the recent $0.95 PP. (3MM shares at $0.95 and 3MM $1.50 warrants). I like that buying now is well below recent PP, so little incentive to flip for warrants.
cheers
ATW Ventures - ATW.V Interesting near term junior gold producer that just picked up two mines with mills in Australia for pennies on the dollar.
Grandich, Roulston, Lundin and Sprott all like it. But share price is weak due to warrant sales and looks like good time for entry.
ATW has an informative website and posts the research from the above. I think all rec'd the play at modestly higher prices.
Worth doing some DD imo.
Pescod mentioned GMI last Thursday and spread the rumor that there might be a deal with Capstone in the offing. Insider activity coupled with lots of out of the blue buying interest has me thinking there maybe something to the rumor.
Today's Pescod was highlighting the big sell off in Ecuadorian plays (Aurelian, Corriente and Dynasty) due to the suspension of all mining activities for 6 months and "review" of the mining law. Hopefully, investors will wake the hell up and start valuing safe plays far more highly. It's disgusting to see so many "experts" recommend plays in places like Ecuador, Ven, DRC, Mongolia etc etc and see so many sheep pay similar (or higher) valuations than what you can buy in safe jurisdictions. So many of these "experts" have their head so far up their arses they see sunshine again. Just how many times do investors get crushed by buying into plays in these dubious countries? And it's not like you can't find great value in Canada, US, Australia, Europe etc.
Only extremely undervalued plays deserve a place in one's portfolio in politically dubious countries, and then only with mad money. Personally, I hope those Ecuadorian plays go to zero - only then will investors start to wake up. Investing in Ecuador is akin to banks paying AAA prices for subprime junk.
Gradual move into oversupply in 2010/2011.
Ok, so how many years in a row have the "experts" been telling us the exact same thing? Has to be at least 6 years in a row now. And curiously, the more they predict the shortfall, the farther away the "over supply" becomes. In past years, the "avalanche of supply" was to arrive "next year". Now, that avalanche is two years away - talk about chicken chit "analysis"!