Member Info for aprogerson

@akhtar My figures are per asset not for a wholesale buyout of 100% of ARCM "I would expect a figure in excess of $600m / £430m (or £300m to ARCM) to close a deal on ONE Asset." was what I said ... if that is too little, well I hope you are right!

On the basis that ARCM have at least 2x Tier 1 assets up for sale/JV plus the balance of their licence areas to go into production with that is a mid-tier multi-asset copper producer/explorer in the making assuming NvS/AAL want to go that route especially if cash/cashflow can be used to get access to other decent licences in other jurisdictions to spread country risk.
APR

@marco I have now (£9.59 lighter but had to look!) Nice article from Joel Deakin who talks about the same things we are and has come to broadly the same conclusions stating "With the company being fully funded until the end of 2022, they hold all the cards when it comes to negotiations." which is what we have been saying now for weeks with myself and others trying to put this into words and backed by figures where we can.
ATB APR

It's interesting that AAL considering splashing out on a full takeover would have been seen as audacious a year ago and is probably what AAL shareholders would be expecting them to do now before someone else does. However I just cannot see how $250m per Tier 1 asset or £180m equating to £125m to ARCM (~70% licence ownership) would be remotely interesting to NvS when that equates to just 5.5 years FCF from Kalaba small scale production facility (ref. my calculation of £22.8m/annum FCF @$8k copper @14-Feb-2021 "Scoping Study & Goldilocks Scenario").

From my 14-Jan-2021 full post @Comparable valuation: US$260m/£205m (FQM buys Kiwara/Sentinel 2009) x 30% better ARCM grades (lower costs) at 55% better Copper price (more profit/ton) = £410m. https://www.reuters.com/article/us-kiwara-first-quantum/first-quantum-buys-kiwara-for-260-million-idINTRE5AM3Y220091123

SP & MCap Contributions & Calcs:
> Production: Kalaba facility once up & running = minimum 5p or £50m MCap ... 9-12 month timescale and 12m+ for full £22.8m FCF as production settles down so minimum extra 5p or £50m MCap (as £100m MCap =junior 1-asset producer)
> Balance licences: after divesting 1x Tier 1 asset = minimum 5p or £50m MCap (as £50m =pure junior explorer)
> Asset Sale: divest and/or JV 1x Tier 1 asset @£410m x70% share =22p or £287m MCap ... 3-6 months timescale
Sum of parts = 32p over next 3-12 month timeframe rising to 37p over 12-18 months as Kalaba fully operational.

Bottom line if Sentinel is a good comparison (it is and is only 40km from ARCM licence area) then a ARCM Tier 1 asset should be worth $550m / £410m at todays copper price so I would expect a figure in excess of $600m / £430m (or £300m to ARCM) to close a deal on ONE Asset. AAL are unlikely to want to pay that which is why I think a JV is very likely.

Someone tell me if my figures, assumptions or approach is misguided ?!
AIMHO APR

@tricky You can probably tell I'm 100% in the JV camp for one or two potential Tier 1 assets with ARCM retaining the bulk of the licence areas for future exploration and its own copper concentrate production so that it remains cash generative and therefore self-sufficient financially so avoiding dilution via shareholder cash raises.

For me this generates long term shareholder value at diminishing risk with excellent short term SP appreciation and solid longer term SP growth as revenue streams come online. With ARCMs very large prospective licence areas and likely AAL deal in coming weeks a rise from £70m MCAP to £150m+ would be no surprise ... in addition bringing Kalaba production online and generating £30m+ FCF in 18 months time could easily add another £80m-£100m MCap.

Looking at the soil sampling maps there seems (to me at least) to be 3x potential BIG Tier 1 assets and a number of smaller assets that ARCM may choose to run, JV or divest and with copper price rising steeply the economic criterion shift rapidly in ARCMs favour given that the Kalaba Scoping Study economics have already shifted by +50% FCF from $6.5k to $8k copper.
AIMHO APR

@SH It's an interesting dilemma JV vs. takeover for BOTH ARCM and AAL:
ARCM JV vs. full/partial buyout:
> Lose control of asset development timeframe vs. have cash & ability to fund own exploration now
> Keep an interest in asset/s and exposure to upside vs. cash now but no upside
> AAL 'earn' % stake in asset/s for funding all OPEX & CAPEX to DFS and mine ready status
> JV can have 5-10% buy at market rates clause so ARCM get cash bubble at end and revenue stream on remaining % stake in JV into production

AAL JV vs. full/partial buyout:
> cheap access to ARCM asset/s & hedge bets due to exploration risk vs. asset is 100% yours
> partner with ARCM on further exploration so share risk & shutout competition for further ARCM assets in future
> JV shuts out competition as market value of asset not tested
> If asset not economic then can walkaway and/or sell % stake on to another player

In Summary:
ARCM ability to produce its own copper concentrate and generate a profit is a gamechanger as it shifts any of the above firmly in ARCMs favour as we are not forced into a deal and have the option of going back to the market for another partner without risking insolvency as junior explorers often do.
GLA APR

@F29 No one likes debt but it is a means to an end and preferable to further dilution. However my calcs at $8k copper show £30m+ FCF per annum so $5m capital costs for plant are only a few months FCF so really not an issue at all.

I wish CCZ was rallying as hard as my other copper explorer investment ... roll-on end of wet season!
GLA APR

What I really like about ARCMs assets are the shear unmitigated SCALE of their licences and with 3x likely Tier 1 copper assets identified so far coupled with a Copper led commodity super cycle.

Just glad my shares are in my SIPP but shame it was not my ISA !
APR

Hi @Starbuck no idea where you are getting your OPEX or LOM figures from see my breakdown posted yesterday. Revenue $50, FCF $20m so OPEX $30m on $6,500 copper so FCF 50%+ more on $8,000 copper. MCap will be driven by profit and growth ... both of which will be very healthy. Complication will be that early years FCF likely invested in Exploration rather than dividends. What is expected is that chances of further dilution to fund exploration will now diminish very quickly as can be paid for from FCF and/or debt.
All good
ATB APR

Hi @tom Yes I understand what they are I just don't see one on the ARCM daily chart.
What are the dates of the 3 'peaks' you are referring to that make up the inverse Head and shoulders you are referring to?

@tom Sorry don't think there is a reverse Head and Shoulders but there is a very positive pennant / cup & handle formation on weekly chart just completing with todays close above prior high if that helps?

We also retested the Fib 23.6% @6.4p retracement today and finished on it, any close above 6.5p should confirm 6.4p as good support as it has taken a month to get back here to retest this price.
AIMHO APR

Strong buy side volumes 22m today so far

Up 13% because its Thursday? ... very strange, welcome but still very strange after recent drift down

@carling Absolutely so my figures already show 50%+ uplift in FCF from initial Scoping study as copper price used was £6k when it is now well north of $8k.

This is why we invest in miners/explorers in super cycles as commodity price uplift goes to the bottom line and super charges marginal producers as their profit can double or treble very quickly. Just look at Copper with a £1k price uplift in the last week alone !
ATB APR

@agility Company and PI focus will now shortly move to:
> mobilising for detailed IP survey
> mobilising for drilling campaign
> results from above

51% support from retail investors is absolutely astounding and very encouraging for BoD and PIs alike!
GLA APR

Maybe a Bed & ISA going through at 0.26p

@older&wiser Yes I know but was only intended as an indication and assumed all FCF was available . Clearly I used FCF not profit to indicate ARCM would need to decide how it was allocated to Exploration & drilling vs. Production upgrades et al. Scoping Study already assumed that production 'cost' or OPEX included but as I do not have details analysis based on some very broad assumptions.

Anyhow it was only ever intended as an indication as too many unknowns BUT the fact that we can be having these conversations and arguing over how much and what it is best spent on is really encouraging. Whatever it is and however much it is is still an absolute gamechanger for ARCM.
ATB APR

@longfell It is a possibility, but I do think given their assets a major will snap up one or more of the big deposits leaving ARCM to produce from CE ... talk about optionality ! Will be very interesting to see what deal structures are being considered
ATB APR

@longfell Sorry I wasn't clear I used todays SP to illustrate what the effective P/E multiple would be if the Scoping study figures were being produced today to illustrate just how undervalued ARCM is currently or rather just how much it could grow over the next 2 years WITHOUT the exploration upside which will be huge in itself.

Lots to look forward to and as NvS said near-term production "it is a game-changer" and that is not an understatement especially as a PI it massively reduces the risk of holding ARCM shares as dilution is much much less likely now especially as we know they have lots of cash as well to fund the next 2 years exploration and that is without cash windfall from CASA sale in next 2-3 months ... awesome position to be in and I try very hard not to do hyperbole!
ATB APR

From 13-Dec-20 RNS and latest NvS Investor Conference we know Scoping Study tells us:
> Production starts early 2022
> Envisage $50m revenue at $6,500/t copper with $15-20m Free Cashflow (FCF) or 'retained/potential profit'
> Current copper price $8,000/t plus
> Implied production = $50m / $6,500 = 7,700t/annum
> Implied costs to produce = $50m revenue - $20m FCF = $30m/annum whatever the copper price
> FCF @ $8,000/t copper = (7,700 x $8,000) = $61.6m revenue - $30m costs = $31.6m FCF
So production at $8,000/t copper compared with Scoping Study assumptions at $6,500/t copper & static costs would generate $11.6m MORE profit or over 50% more profitable!!!!

EPS and Forward looking P/E Calculations:
> 1044m shares in issue
> FCF (profit) = $31.6m or £22.8m assuming $8,000/t copper price
> Forecast equivalent EPS = 22.8/1044 = 2.18p
> Forward P/E (2022/23) = 6.35p (share price) / 2.18p (EPS) = 2.87x

Commentary
The above EXCLUDES value from Exploration and assumes ARCM value only measured by production figures using todays SP and values provided by ARCM Scoping Study to derive FCF of £21.8m with P/E of 2.9x. For reference big established miners P/E such as AAL = 13x, FQM = 8.4x and Glencore = 16.5x implies ARCM SP has considerable growth potential at only 2.9x !

You would expect ARCM to be priced for a high P/E to reflect high growth potential when forecast FCF of £21.8m in 24 months time at assumed $8,000/t copper price. Is there a Goldilocks scenario where ARCM can scale up production and/or exploration and/or JV as it goes and be internally funded from its own FCF then you would expect no shareholder dilution and a rapidly growing SP and MCap?
AIMHO & DYOR APR