The latest Investing Matters Podcast episode featuring Jeremy Skillington, CEO of Poolbeg Pharma has just been released. Listen here.
Looking at the MRE3, Alpala has an in ground resource of 9.9mt Cu, and 21.9 m oz gold. At current metal prices this is over $110 billion, but it will take about 55 years to mine.
The high grade core to be mined within the first 10-15 years of the mine has a resource of 3.8 mt Cu and 12m oz gold for an in ground value of approx $50billion.
No wonder FNV were willing to fork out $100million for a 1% NSR - will see that back 4 to 5 times over the first 10-15 years of the mine and then have an ongoing royalty for the next 40 years.
Have to believe we should be valued at over 0.65% of the overall in ground metal value. Time will tell
If you look back through the history of news releases every 3 months we have to publish an MD&A for the Canadian market. Tomorrow the one for the quarter ending June 30th is due to be released. The MD&A gives a full summary of the current status of each of the projects. As a result we get updates over the week before the MD&A to highlight the progress.
I expect we will get another RNS for Porvenir tomorrow alongside the MD&A and the end of year results.
News expected during late 2019 early 2020
Dec - Blanca !st results and more visuals
Dec - MRE 3
Dec - First Visuals Porvenir
Jan - Long term funding news
Jan - More results Blanca / first results Porvenir
Feb - More results Blanca / Porvenir
Feb 15th - Cascabel & Regional update in MD&A for period to end Dec 19
Feb - First visuals Hueca
March - PFS delivered
March - More results Blanca / Porvenir / Hueca
March - Results from other Alpala drilling (other areas?)
Anytime - Update on Cornerstone bid
BHP to increase holding in Solgolg.
https://www.bloomberg.com/news/articles/2019-11-25/bhp-is-said-to-plan-to-boost-stake-in-ecuador-focused-solgold
Quick look at Tecks QB2 for which $1.2b for 30% was paid this week. Will have an initial throughput of 140,000 TPD or about 50mTpy.This will initially be at about 0.65% cu eq to give an output of 320,000T Cu eq per year. All for an investment build cost of $4.7b.
For Alpala we will have an initial investment of about $2.5b for a 20mTpy mine focussed on the high grade core. This will be the 120mT at over 2.4% Cu eq. Giving production of about 450,000 T Cu eq per year. Over the first few years thry will invest another $2b to double throughput to 40mTpy at the lower grade of 1.4% once high grade core exhausted. Giving production of over 500,000T Cu eq per year.
On this basis Alpala will have a hugely better NPV or discounted cash flow model and so will be worth a premium to QB2. QB2s valuation already would put us way over £1.
QB2 has a 2 to 3 year head start on Alpala, but it gives an idea of the value Nick will be looking at once PFS and BFS are completed.
My guess in excess of $5b at end of 2020 if everyone waits till then.
The critical point of lowering the cut off grade to 0.2% is that they believe it to be economic to mine. As we all know this section won't be mined for decades so why is this important? Because it indicates that for all the high grade core the costs will be lower. If you can make a profit at about $13 per tonne (0.2%) instead of $19 (0.3%) per tonne you make an even bigger profit at $100 (1.6%) per tonne ore.
This is what Nick was saying about the ore being well fractured and partially self milling during block caving. So reducing mining cost and increasing margin and overall project NPV.
We have about 80 geologists in a country that is rapidly becoming the go to place for new discoveries across the whole world. I think some options tieing them to the company over the next three years is a small price to pay.
The competition for good Ecuadorian geologists over the next few years will be intense.
Hole 64 is the next exciting news I am expecting. They had a picture at 2120m depth in their 20th September presentation. By Monday will be over 4 and a half weeks on from then, and the assay turn around is dropping from a max of 5 weeks to 3 weeks by December. I'm expecting an RNS early next week with Hole 64 assays plus a few others, and a summary of what extra holes are to be drilled for MRE 2.
As ever wouldn't want to be out over the weekend.
In the last RNS they stated 14km of new drilling to go into the MRE2. Alongside the 148km already drilled (124 assayed and 24 to assay). That puts them at 162km in MRE2 and so 108km of new drill compred to 54km in MRE1.
This about matches with the ~105km new in the linked note.
So they have 14km to drill for MRE but by end of 2018 they say they will have drilled an extra 32km. Looks like 2nd to 3rd week in November to finish drilling, and MRE in December.
It is interesting that between August when they were going to stop at 100km and now, they have added an extra 8km, why?
My guess is either to add to resource round holes 64 and 66 or they've sent the data to the external assessor and they need a couple of extra holes to confirm some of the core they expected to include.
So from the last presentation they are targeting a high grade core valued at $170 per tonne. Also aiming to reach a production rate of 40 MT per year. Initially would only need 12MTpy to bring in a cash flow approaching $2 billion a year, could pay for the expansion. At 40 MTpy it would be over $6 billion a year in cash flow. I could live with a bit of dilution along the way to get to this point.
Will keep the track mounted drills 6 through to 12 on Cascabel to drill out the expansion round hole 64 and the other prospective areas. They have said they are targeting drilling 5 of the new tenements over the next 12 months. So one each of the man portable drill rigs (numbered 1 to 5) to each of their 5 picks.
The most exciting thing about the last presentation was Nicks mention of hole 64. It is potentially the deep root of the system. The slide and his comment show it is bornite rich and so also gold rich. They also show a diameter of 150m around the drill hole at above 1.5% cu equiv. This suggests that by inspection of the core they have assessed over 300m in length at above 1.5% cu equiv (still waiting on analysis but will have been fast tracked). This is huge as it is over 200m north of the rest of the high grade core so will be a huge expansion of the high grade core. Is it a coincidence that BHPs investment came just when this core will have come out of the ground - probably but it will have made the decision to invest easy for them. Over the next couple of weeks the assay will come back for this core in a huge RNS and I expect sections over 5% cu equiv. This will be what jumps us through 40p and beyond. See pg 21 for the brand new circle of resource round hole 64 and pg 25 for the pic of the deep (over 2100m) core with black bornite spots. Nick couldn't help but mention hole 64 (to big not to), and also said that the track mounted drills could go down to 2800m 'if required'. They have found the root of the core and are going after bonanza grades that come with it. Any geologists out there will see what it is. The excitement from the next RNS will be huge. As ever all imho.
I think Nick is trying to become the Elon Musk of the copper business. Bootstrapping is how Tesla used a small investment in high end electric cars to fund the mass production of a standard electric car. Here a small investment in a gold mine ($1B with only $ 400m in equity, rest financed) will be used to build first a 20mTpy then a 40mT per year porphyry mine. This would never normally be possible by a small miner but the combination of a huge land grab, and a high grade core, alongside a high grade epithermal gold deposit has given them the chance to achieve it. After that they have the rest of the tenements to play with. They could be a major in the making.
The thing with the local miners is they will tell you what grades and where. Hence Nick quoted grades of 1 to 2 ozs per tonne. That $1200 to 2400 per tonne. Equiv of 20 to 40% copper. There mines also show you where the surface material is. So no need for geophis or soil chemistry. Just drill where they have mined. Look at Lundin gold - millions of ozs at 0m to 400m. This is what they have at Blanca Nieves and this will fund the equity part of the $2B to build a 20 mT per year mine at Cascabel. Which in urn will fund the 40 mTpy mine Nick talked of ss the final goal. All this reduces the dilution to 3 billon shares as as sn end point rather thsn the 5 billion I initially expected.
Goldenveg Latest presentation pg 19 gives figures for all Cascabel (Alpala snd Aguinaga) drilling. Shows in August the rigs on Cascabel reduced from 12 to 11. May just need to be maintained, but I think moved to Blanca Nieves. Cheers