Zaruma Resources (ZMR)

[nellocat1]

here a VERY nice DD from someone of stockhouse.com who did a lot of work on it:

Please comment on it:

Summary # 1 : 3 deals in 1

1. $ 22 m loan for LDC to be paid back by Jan 31 2011 = 3.2 years
No less than $ 25 m with interest.
Interest will apply to about 2.5 y and not the whole amount for 2.5 Y,
because they may draw that money on as needed basis - in line with
construction progress and pay them back rapidly.
Most likely Libor ( E$ = 4.2%) + 4 % = around 9%.= around $ 3 m
LDC production in 14 months = Feb 2009
2. US$1.5 million for development of the Trion area, a mineralized target zone 1,000 metres to the west of Luz del Cobre.
That will accellerate this development by 2 y ,instead of waiting for CF to pay for it.
Four months and 3,300 metres of drilling.
Results, Feb- March 08.
See page 11
http://www.goldinvest.de/public/data/documents/ZarumaResources_Luz_del_Cobre_July_Presentation.pdf

Triton is as big as LDC and LDC itself is 25% bigger than today's mining plan.
3. JV with Glencore for 1,000 ha Sapo and Carrizo deposit- 8 km from LDC
Previous drills indicate potential for hosting significant leachable copper mineralization.
G will earn 51% in that JV by spending $2.5 m and paying to ZMR $ 2 m.
NOTE: that JV applies to just 10% of ZMR 11,500 ha licences in the area
see page 12 map
http://www.goldinvest.de/public/data/documents/ZarumaResources_Luz_del_Cobre_July_Presentation.pdf
Sapo and Carrizo look like 10 times bigger deposits than LDC
Cerro Verde - for later also 10 times bigger tham LDC
THIS MAP IS SHOWING 25 TIMES BIGGER POTENTIAL THAN LDC.
25 x 15 m lbs production = 375 m lbs potential production/ y + Venezuela.
see next post

Summary #2 price trajectory
THE COMING PRICE TRAJECTORY,TARGETS
1. 21 c = 20% from here
FIRST PPS LEVEL TO BE ACHIEVED ABOUT NOW
BOTTOM LINE, new support at CASH AT HAND= cap.
$ 22m loan + 1.5 m drilling loan + 0.7 from May PP (with warrants)= $ 23.2m
That's 21c per ZAR (110m ) share
ALL THE $ 1 BILLION IN GROUND GOODIES FREE .
$ 2 m for Glencore buy -in not included.
2. 42 C = 120% from here
Add to ( 1) just 1/2 of , 10 % discounted already. NPV ( not NAV!) of $ 46 m for JUST LDC.
23m + 23 m = 46 m = 42c/sh
Still, all the $ 1 B goodies in ground free.(minus $ 23 m)
It should be at 42c level by drill results in say March 08 ,which can
delinelate another LDC -size deposit.
3. 63 c = 360% from here
A mine permited, financed and say, few months before production (almost constructed)
should trade at FULL NPV ( still discounted 10%)
23 m =46 m NPV = 67m = 63c.
Still, all the $ 1 B goodies in ground free.(minus $ 46 m)
4. $ 1.23 = 700%
Upon production removal of 10% discount to NPV.
NPV at 0% discount = $ 110m = $ 1 /sh + 23m (1) = 133m
$ 1.23 PPS will correspond with CF.
CF at $ 2.5 Cu = $ 19.4 m = 18 c /sh x 7 P/CF = $1.23 price
That's $1.3 CF per 1 lb produced = 100% gross profit margin.
Cu prices above $ 2.5 = pure gravy.
CF at $ 2.75 Cu = $ 23 m = 21c /sh x 7 P/CF = $ 1.47 price
CF at $ 3 Cu = $ 30.5 m = 28c /sh x 7 P/CF = $ 1.96 price
CF at $ 3.25 Cu = $ 34 m = 31c/sh x 7 P/CF = $ 2.17 price
CF at $ 3.5 cu = $ 38m = $ 34 /sh x7 P/CF = $ 2.38 price
Just due to sliding USD ( not to mention India doubling it's
electricity /grid demand, while China not done yet),
the Cu price by 2009 may be way over $ 4
That would be an icing on a cake, but leave the dessert for later.
http://www.mineweb.co.za/mineweb/view/mineweb/en/page36?oid=37927&sn=Detail<BR< a>

At $4.5 Cu add another $ 15 m to CF and $1 to PPS.
5.Correction for dilution.
ZMR will need $ 3 m at the end of construction = end 2009 to finish it.
Depending how high the price will SURELY go before that :
--at 30 c = 10 m sh dilution Adjust above numbers down by 10%
--at 60c = 5 m sh dilution .Adjust above numbers down by 5%
The brokers,noticing ZMR is a go and a success story with STRONG PARTNER
will bother ZMR to accept their brokered PP's
ZMR may get tempted and dilute more - to apply the $$ to THE FOURTH
READY TO GO PROJECT - St.Antonio 400k ozs (so far) gold deposit or
to accelerate the 2 copper deposits - one 100% ZMR, one 49% with Glencore.
But do not do any of that under 60 c and later not.under $ 1.2
6 .THE POTENTIAL IS FRIGHTENING ,MIND BOGGING
see page 12
http://www.goldinvest.de/public/data/documents/ZarumaResources_Luz_del_Cobre_July_Presentation.pdf
Sapo and Carrizo look like 10 times bigger deposits than LDC
Cerro Verde - for later -also 10 times bigger tham LDC
THIS MAP IS SHOWING 25 TIMES BIGGER POTENTIAL THAN LDC.
25 x 15 m lbs production = 375 m lbs potential production/ y + gold
+ Venezuela
That's $ 400m /Y PROFITS (at just $1 /lb) x P/E10 = 4 BILLION $$ COMPANY
= $ 20 price at 200m sh
100 BAGGER = 10,000 %.
Can you throw $ 10k at ZMR and forget it for 10 years to cash out $ 1m ?
(not to good idea on board full of daytraders...eh..)
50 bagger more likely if ZMR will give away 1/2 in exchange for financing
or equity finance itself.
Previous owners spent $ 23 M to draw that map and to put some numbers on it.
More than ZMR's cap now.
THIS IS OBSCENE OPPORTUNITY.
Summary # 3 What is in ZAR package

ZMR owns 4 mining D I S T R I C T S
see page 12 map
http://www.goldinvest.de/public/data/documents/ZarumaResources_Luz_del_Cobre_July_Presentation.pdf

Today's starting point- the LDC- looks like a little dot on their big map.
1/500 of their land .
Venezuela's gold is still for free.
All they need, is to make more such deals like today,
Farm it out to collect 50% with no expenses etc.
Whole Vancouver is running around Mexico and LA in search
of properties. In desperation ,they buy even old silver mines
depleted by Columbus 500 years ago.
And ZMR has HANDY,BIG,partially explored,partially NI41-101 PROVEN
land package.
Just need some money to accellerate things into mid-size league.
--------------------------
Anyway, ladies and gents, WE HAVE A MINE.
Still best kept secret
We beat the fricken gold gurus to that one.
On a cheap too.
A starting point to much greater things coming.
Muchos dinaros in any case.
Right now we have:
1. LDC under construction
2.Drilling Triton which can double the size of LDC
3.Glencore drilling 10 times bigger district than LDC with 49% for ZMR
4.PROVEN RESERVE 400k ozs. of St Antonio gold waiting for
expansion to 1 m ozs ( MAJOR GOLD CAMP) and financing
Spent so far $ 12 m = almost cap of ZMR
5. Cerro Verde district - 10 times bigger than LDC -looming
6.Venezuela gold El-Foco - so far indicated 140k ozs-
Bigger ( 13,500ha) than the 4 Mexico districts.
94k ozs NI-43-101 PROVEN.
Road accessible with camp and office in place
Greenstone belt setting. $ 8 m ( 1/2 ZAR cap) spent on development already.
http://www.zaruma.com/public/data/library/elf_propertymap_lg.gif

7.Romero- Venezuela - concession for later.
Muchos gracias Proffessores.
You not only feed your student's minds with knowledge
http://www.stockhouse.ca/bullboards/viewmessage.asp?no=15668519&t=0&all=0&TableID=0

You'll fill-up wallets too of those students who are attentive enough to see the size of a green patches on your "treasure map

Summary #4 Oct 05 action

0ct 5 Frfankfurt vol 6 m vs aver 177.5 k = 35 times aver
http://finance.yahoo.com/q/bc?s=ZMR.F&t=5d

0.105 E$ to 0.14 = 33% up and close 24% up
TSX vol 7.6 m vs aver 320k = 24 times aver .
Total F &TSX vol 13.6m = 12 % of company changed hands
http://finance.yahoo.com/q/bc?s=ZMR.TO&t=5d

0.155$ to 0.2$ = 29% up and close 11% up
This link doesn't list most actives under $ 1
http://ca.finance.yahoo.com/actives?e=to
but ZMR would be on second place in vol., ahead of Bombardier , K , G , EQN ,YRI ,ARU vol
For Monday and Tues the ball is in hands of Germans who were apparently more bullish -by 13% on close
COMPARE TO PREVIOUS SPIKES
http://finance.yahoo.com/q/bc?s=ZMR.TO&t=2y&l=on&z=m&q=l&c=

The Feb/. 06 and May 16 & 17 / 07 spikes (2 days x 6 m sh ) were caused by PPs
Not 'real market" trading.
THIS ONE, 7.6 m sh IS REAL.( with a 0.8m sh 'announcement what's coming" on Sep.06)
.FIRST REAL MARKET ACCUMULATION IN ZMR 2 Y HISTORY on TSX.
GROUND FLOOR OPPORTUNITY IN DEED.
The gold gurus , mining sites and jurnals will be next with their write-ups.
The action just started and ZMR won't be best kept secret anymore.
No more "90% sale" tag.
THIS TIME IT IS NOT FAKE ( PP driven) SPIKE.
This is BEGINNING OF REAL ASCEND towards fair value at 60c
FOR STARTERS.
More later.
Reevaluation of both ZMR assets and ZMR itself from forgotten explorer to a producer
in progress.
No more playing 0.5 c swings gentlemen.
Summary#5 Instant reevaluation to 28-37c

My first- step- target of 21 c is based on ONLY 'cash at hand '
per share
When invested in assets producing 100% gross profit margin that cash is worth much more.
The more likely INSTANT reevaluation scenario is ADDING that 21c /sh cash to whatever PPS the company traded at, before getting that cash.
16 + 21 = 37 c.= INSTANT TARGET
Glencore -The World's Master Trader in commodities ( a major suspect behind rising prices) is doing identical financings of companies around the world to the tune of $$ hundreds of millions every year.
They know what they are doing.
They did their DD/ risk assessment on ZMR before commiting a penny.
I fully trust their judgment.
--------------------------------
GLENCORE DIGRESSION
Glencore is famous of doing the best deals.
Picking undervalued assets for pennies .Investing, fixing them till they reach $$ billions in value.
Example 1; Mopani Cu/ Co mine in Mulfira - Zambia - the biggest
( 16,000 employees)in that country.
Glencore picked that one for few tens of $ millions, reorganized it,
build the biggest smelter in Africa.
Now Mopani is about to produce 400kt of Cu Equiv = almost 0.9 billion lbs at $ 1.5/lb profits.
Value of Mopani in couple of years = $6- 8 B .
A 100 bagger for Glencore,but of course it took bit longer than daytrade to get that .
G got more than money there.Through that smelter they control
1/3 of DRC and Zambian Cu prod and 1/2 of Co. (2.5% of world's Cu prod and 30% of Co.)
The hot EQN couldn't exist without G taking -off EQN concentrate .
Example 2 : Russneft an oil major out of nowhere
http://www.themoscowtimes.com/stories/2005/08/03/002.html
"Exactly where Russneft got the cash to become a major Russian player in less than three years remains unclear."- Moscow Times.
Well, apparently Moscow journalists have no idea about Glencore's
$ 500m loan to develop Rusneft assets.
http://www.reuters.com/article/innovationNews/idUSL2465222720070724?pageNumber=3
Such mind bogging growth/ profits caused a witch hunt by Puttin.
The same pattern is visible in ZMR.
Glencore turning nobody into quite a player.
Example 3: RUSAL - #1 aluminium co in world
http://www.rusal.com/
Rusal, SUAL Group and Swiss commodities trader Glencore merged in March 07
The upcomong London IPO will start from $ 30 B and end trading at
$ 50B
Well, G got it's 20% stake early for millions. They did what pre-IPO investors in GOOGLE did - ( bought-in at $ 1 of GOOG share. which went to $ 500)
End of digression
------------------------------------------------
What is even more stunning - G loaned ZMR 140% of
apparent ZMR collateral - ZMR equity of $17m .
NO ONE DOES THAT -the max debt -to asset value is 75%
THAT CAN MEAN ONLY ONE THING: G IS VALUING ZMR AT
MIN. 28 c /sh. and comfortable to grant a loan 40% higher than
today's ( TEMPORARY) ZMR equity value.
Knowing G cheapness and talent to pick-up value - G sees future
ZMR value much higher than that
Most likely upwards of 60 c.
It doesn't take a financial genius to figure that out in a first place.
Such UNUSUAL and STRONG endorsement of ZMR future by G
means only one thing.
UP WE GO.
# 6 Where $ 3 m for capex will come from?

Simple :
$ 1 m from warrants exercise
At 12, 13 , 16 c they are already or will be shortly all exercized
Most of them likely sold already.
The 20 m sh vol in 3 days between TSX and Frankfurt is
over 2.5 x bigger already than all the warrants.
$ 2 m from Glencore JV buy-in.
That 3 m is not needed for a year now anyway.
---------------------------------
Cost per tone
In 1 place they post $ 13.4/ t in another $16.4 in their TR.
Sales by tone 1% grade = 10kg= 22 lb x $ 2.7 = $ 59.4
CF /tone 59.4 -- 16.4 = $ 43
Compare to touted here TAM $ 158 / t cost.
The labour cost is under $ 1 m / y for whole LDC mine while TAM
labour is $ 555 per worker per 12 hr shift = $ 190k per worket / Y
5 TAM workers cost same as all ZMR ( 100?) employees.
TAM will spend $ 22 m just to freeze the ground to make the sinking of the shaft possible and not to drown in pouring water.
TAM cost to open and run for 1 y ( the R19 deposit is JUST for 1 Y !!)is $ 127 m.
The CF will hardly cover the expense --and then what?
TAM is not financed and not permitted.For next 3 y TAM is BS.
Maybe later after 100% dilution.
#7Drilling can expand resource by 100%

The drilling can expand resource by 100%,to 200m lb
Links to summaries #1- 5 here
http://www.stockhouse.ca/bullboards/viewmessage.asp?no=15755912&t=0&all=0&TableID=0
-------------------------------
1. The previous owners drilled 72 holes in LDC x 80-100m aver = 7.2 km.
Plus plenty of trenches,tunnels ect.
ZMR just added 13 holes ( 1.3 km ) to bring LDC to 43-101 compability.
IT took 8.5 km of drilling to define 100m lb resource.
The problem (and time wasted)with LDC was not increasing the size of resource but complicated metallurgy.
With both sulphides and oxides. Resolved now.
2 Similar,there won't be problem with documenting the resource in Trion and El Tigre FAST.
They have fair milage of holes and trenches already .
ZMR plans to drill 3km each ( 6km),starting now and ending Feb 08.(page 48 TR)
If it took ZMR to just add 1.3 km of drilling to define LDC 100m lb in 43-101
the 6 km drilling in Trion and El Tigre should achieve same result = 100 m lb.
Say, on safe side -there will be 80 m lbs MORE documented by May 08
(added time for labs)
3. But the real treat is in Glencore's JV part.
Sapo and Carrizo.1,000 ha
"Ore grade copper intercepts in trenches and isolated drill holes indicate the potential for hosting significant leachable copper mineralization."
To see how big potential there is, one have to take look at ZMR map
http://www.zaruma.com/public/data/library/sa_mineralholdings_lg.gif

Sapo and Carrizo is almost 50% bigger than CCU 680 ha claim RIGHT NEXT DOOR.
A portion of the white area between S & C and Cerro Verde is own by CCU
CCU calls it SAN JAVIER DEL COBRE
http://www.constellationcopper.com/sanjavier.php

The CCU project is comprised of at least three partly defined deposits which are from southwest to northeast: Cerro Verde, Mesa Grande, and La Trinidad.
Fifty six core holes and 21 reverse circulation holes were drilled
at San Javier in 2006. Drilling is planned to be performed throughout 2007.
A 43-101 compliant resource estimate was just issued
http://www.constellationcopper.com/art/sanjavier/43-101_007.pdf
http://www.newswire.ca/en/releases/archive/August2007/03/c3946.html

THEY JUST DOCUMENTED 639 m lbs and counting !!!!!!!!!!!
On a claim RIGHT NEXT TO Sapo and Carrizo on 2/3 smaller area.
By drilling 77 + 18 previous owner + 25/07 = 120 holes
Assuming 100m aver hole = 12km
4. Glencore $ 2.2 m program of road construction and 3 km of drilling can easy indicate 200 m lbs ( 100 lbs for ZMR) resource .
More drilling ( $ 5 m?) will be required to bring that to 43-101 compliance and to the neighboring CCU claim size
of 700 m lb !!!!! ( 350 m lb for ZMR)

5. By 2010 ZMR can add easy 350 + 100 m lb to a total with LDC
( which has itself 25% higher potential) of 550 m lb
x $3.5/lb = $2 Billion of just Cu in ground.
So, increasing production by 100% to 30 m lb /y by starting to reinvest LDC profits right in the first Y ( not paying back in full the loan) is in the cards
Increasing LOM to 20 years.
AND THE CARDS CONSIST OF 4 ACES.
I, in ZMR place would dilute at 50c or $1 to rise money ,to make it happen sooner and maybe even bigger ( The gold deposit is waiting
to be increased to a critical- mass - size of 1 m oz. )
Venezuela is hugely prospective too.
In that case we are looking at $ 2 PPS after 2010, even after dilution .
1,000% in 3 y = 300% average Y.
First 100% should happen within week(s)- to 36c.
Summary # 8 Final GUARANTEED CF =17,5 c /sh

$ 1- 1.1 target , 17.5- 18.5 c CF based only on LDC
IS THE FINAL ANSWER.
If someone offers less - NO DEAL.
The 500k oz gold,( 400k oz in 43-101) worth in ground 10% of current prices= $ 35m = $ 0.30/sh IS FREE.
Or treat that Au as a conservative 30% discount / risk buffer to that $ 1 price.(sholud be $1.3 with Au)
-----------------------------
The forward sale prices for 2009-2011 are here
http://www.equinoxminerals.com/files/document/320_Sept_11,_07_HedgingProgramCompleteFinal.pdf

For 2 H 2009 when LDC will be in production $ 2.64/lb
1 H 2010 = $ 2.61
2H 2010 = $ 2.48
1H 2011 = $ 2.41
If ZMR will have to hedge 80% of prod to secure the loan, the later they will do that, the higher the price .
Above EQN hedges arranged in Aug are by now bit higher because of forward curve going up ,to be closer with reality.
By now they must be like $2.7 /09 , 2.53 aver 2010
Raymond James said the Cu equities are becoming cheaper by the week because forward curve for 2010 Cu prices went up to $ 2.5 from $ 1.05
Looks like Cu stocks got 2 x cheaper in that metric and counting.
On the bright site that hedging GUARANTEES below CF
NOW WE HAVE ALL DATA TO CALCULATE ZMR CF
Assume they will start selling in 2 H 2009 ( will sooner)
So, first Y of prod , 80% hedged = 12m lb in 2009/10 for $ 2.6/lb aver and 20% = 3 m lb @ $ say, $ 3,5
That's $ 31.2 m + $ 10.5 m = $ 41.7 m sales = $ 2.8 average/ lb
At $ 1.4 CF / lb ( 2.8 minus $ 1.4 TOTAL cost) x 15 m lb
= $ 21 m CF
$ 0.175 /share x P/CF 6 = $ 1 target PPS
Pay back debt in 1 year. or better yet, keep it( pay just planned rate ) and invest in increasing production by say 50% out of expanded by that time resource in El Tigre ,Trion and Glencore JV by 100%= 100m lbs.
See previous post - the 100% expansion of resource by 100m lb in time for production.
In second Y they plan 18.5 m lb prod.= 30% more anyway.
80 % of it = 15 m lb at $ 2.5/lb = $ 37.5. m
20% = 3.5 m lb at say $ 3 /lb = $ 10.5 m
Total sales $ 48 m. at $ 2.6/lb aver.
18.5 m lb x 1.2 /lb CF = $ 22.2 m = 18.5 c /sh in second Y assuming sliding down Cu prices.
x 6 P/CF = $ 1.1 target PPS.
After 2 -nd Y they can be hedge and debt free and have 24-25 m lb
prod growing later to 30 m lb.
MUCH more if Glencore JV will get on line.
NOTE: CF = CF before taxes
In firsr 2-3 y ZMR may pay zero taxes because of reinvesting all money into prod growth, accellerated drilling ,paying back debt etc.
They have $5 m tax allowances till 2011 anyway ,because of years of losing money.
Hedge lowers the profits in first 2 y but makes them VISIBLE,PREDICABLE ,therefore making investment in ZMR
as RISK FREE as it can get.
Aver grade of 1% is not bad either.
----------------------------------------------------
At $ 2.7 GUARANTEED Cu price the NPV is see table page 67 TR where they only go up to $ 2.57 Cu)
0% discount - around $ 75 M = 62 c/sh
5% discount - around $ 60 m = 50 c/sh
10% discount - $ around $ 50 m = 42 c/sh
So, in worst case of 10% discount it is 120% from here.
In 1.5 y ( sooner because of market anticipation of that),
at the start of production ,the discount will be removed to zero
= 62 c/ sh = 340% from here.
Here goes mentioned above 300% aver per Y for 3 years.
With higher GUARANTEED Cu price, the cut-off grade will be also lower = higher production.
#1-5 summary here http://www.stockhouse.ca/bullboards/viewmessage.asp?no=15755912&t=0&all=0&TableID=0

# 6 http://www.stockhouse.ca/bullboards/viewmessage.asp?no=15853732&t=0&all=0&TableID=0

#7 http://www.stockhouse.ca/bullboards/viewmessage.asp?no=15853745&t=0&all=0&TableID=0

Too good , or too bad - depending on ones intentions/position-
ZAR is still best kept secret.
To bad ,the first to know the secret are mostly daytraders.
The "company maker " - Glencore is at work.
And it will show in next years.
GUARANTEED.