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Showing posts with label copper. Show all posts
Showing posts with label copper. Show all posts
Saturday, August 22, 2015
Thursday, June 13, 2013
PolyMet Mining (PLM) Found Metals in Minnesota
PolyMet Mining (PLM) is working a copper and precious metals deposit in Minnesota's Mesabi iron range. This company deserves a fresh look. The CEO is not a geologist but it's good that he has tons (no pun intended) of mining experience. The rest of the D&O team has a decent amount of experience in the resource sector.
They have a very recent 43-101 report for their Northmet project. The Cu equivalent percentages in both their M&I and 2P categories look to be an above average discovery. The really good news is that they have an existing mill that is more than large enough to handle their projected production. Their IRR estimate of 30.6% would impress even Rick Rule. This is a sufficiently de-risked project that will enable production. My remaining concern is whether they can maintain a competitive cash cost of production over the mine's expected life span.
Massive financial backing from Glencore has been a boon for PolyMet and they still have to complete their permitting to get production started. Their most recent 10-Q dated April 30, 2013 shows that they have US$19M in cash on hand. Comparing their net losses for the two quarters depicted in those statements gives a burn rate of about $485K/month. They can survive for a couple of years but permitting will require significant cash outlays, so further capital raises are not out of the question. Existing convertible debt will significantly dilute existing shareholders if the company executes the remainder of its plan and impresses the market.
I kind of like this stock, although I'm not ready to invest just yet. I don't expect permitting to be a major problem, so I'm willing to revisit PolyMet in about six months to assess their progress.
Full disclosure: No position in PLM at this time.
They have a very recent 43-101 report for their Northmet project. The Cu equivalent percentages in both their M&I and 2P categories look to be an above average discovery. The really good news is that they have an existing mill that is more than large enough to handle their projected production. Their IRR estimate of 30.6% would impress even Rick Rule. This is a sufficiently de-risked project that will enable production. My remaining concern is whether they can maintain a competitive cash cost of production over the mine's expected life span.
Massive financial backing from Glencore has been a boon for PolyMet and they still have to complete their permitting to get production started. Their most recent 10-Q dated April 30, 2013 shows that they have US$19M in cash on hand. Comparing their net losses for the two quarters depicted in those statements gives a burn rate of about $485K/month. They can survive for a couple of years but permitting will require significant cash outlays, so further capital raises are not out of the question. Existing convertible debt will significantly dilute existing shareholders if the company executes the remainder of its plan and impresses the market.
I kind of like this stock, although I'm not ready to invest just yet. I don't expect permitting to be a major problem, so I'm willing to revisit PolyMet in about six months to assess their progress.
Full disclosure: No position in PLM at this time.
Thursday, March 14, 2013
NovaCopper (NCQ) in Alaska
NovaCopper (NCQ / NCQ.TO) is a junior copper explorer that NovaGold spun out last year. The spinoff's CEO is the geologist who founded that parent. I like serial entrepreneurs who launch new projects in their field. Note that the Thayer Lindsley award for 2009 was shared by several geologists and explorers involved with the Donlin discovery. Just sayin' you gotta give credit where it's due.
The preliminary findings from their Upper Kobuk projects are definitely intriguing, with indicated and inferred resources far above typical copper grade discoveries. Photos of the project show a fairly challenging topology to mine but the valley floor may have sufficient space for a mill facility and tailings site; it's just hard for me to assess it without being there or seeing a vertical view with elevations and a distance scale. Their presentations shed some additional light. One longitudinal cross-section of the Bornite South Reef shows a substantial amount of overburden that will be costly to remove.
The good news on logistics is that NovaCopper has a solid plan to finance the construction of a 200-mile road connecting their project to the highways that lead to Anchorage. I didn't see any power lines or water wells in those photos, so I hope they have a plan for the infrastructure they'll need. They also need a final 43-101 with a 2P estimate, but if the grades stay as high as promised the project will be very satisfying to pursue.
Their most recent financials from November 2012 showed cash on hand of US$22M and net losses of US$31M. They will need to raise a lot more money ASAP to continue their developmental work, so investors should expect further dilution. That's even worse news for anyone who held NCQ stock since inception in April 2012, when it traded at $4.72; it closed today at $1.86.
NovaCopper has a potentially rich find but will need lots of capital to make it work. I'm not an investor yet but I won't count out a team that made NovaGold work.
Full disclosure: No positions in any companies mentioned.
The preliminary findings from their Upper Kobuk projects are definitely intriguing, with indicated and inferred resources far above typical copper grade discoveries. Photos of the project show a fairly challenging topology to mine but the valley floor may have sufficient space for a mill facility and tailings site; it's just hard for me to assess it without being there or seeing a vertical view with elevations and a distance scale. Their presentations shed some additional light. One longitudinal cross-section of the Bornite South Reef shows a substantial amount of overburden that will be costly to remove.
The good news on logistics is that NovaCopper has a solid plan to finance the construction of a 200-mile road connecting their project to the highways that lead to Anchorage. I didn't see any power lines or water wells in those photos, so I hope they have a plan for the infrastructure they'll need. They also need a final 43-101 with a 2P estimate, but if the grades stay as high as promised the project will be very satisfying to pursue.
Their most recent financials from November 2012 showed cash on hand of US$22M and net losses of US$31M. They will need to raise a lot more money ASAP to continue their developmental work, so investors should expect further dilution. That's even worse news for anyone who held NCQ stock since inception in April 2012, when it traded at $4.72; it closed today at $1.86.
NovaCopper has a potentially rich find but will need lots of capital to make it work. I'm not an investor yet but I won't count out a team that made NovaGold work.
Full disclosure: No positions in any companies mentioned.
Monday, January 14, 2013
Dart Mining (DTM.AX) Exploring for Metals
Dart Mining (DTM.AX) is developing Mo / Cu / Ag deposits in Australia. I've finally figured out that small Australian companies name their head cheese Managing Director instead of CEO. Dart's MD has worked in mining engineering and various sectors supporting the mining value chain, and its Chairman is a geologist. That's pretty cool.
Their most advanced property right now is their Unicorn project, with power, water, and roads already nearby. The MII grades for each of those three metals are very low compared to world averages for new discoveries. IMHO the company will have a hard time making that project viable if metal prices collapse, even if the planned mine has a low strip ratio. Their other projects are still exploration targets with no 43-101 data although a couple of their drill results show promising Au grades. Dart Mining is benefiting from local government grants that help fund its early exploration program, which is undeniably helpful in conserving investors' cash.
Their 2012 annual report shows their burn rate has doubled to over $1M/year since they stepped up their drilling programs. They had just under $3.5M in cash on hand on June 30, 2012, giving them about three and a half years in which to strike valuable grades at any of their active projects.
Dart Mining trades under a dime right now but they have plenty of time to discover valuable deposits. I'd like to see what their drilling programs find later in 2013.
Full disclosure: No position in Dart Mining at this time.
Their most advanced property right now is their Unicorn project, with power, water, and roads already nearby. The MII grades for each of those three metals are very low compared to world averages for new discoveries. IMHO the company will have a hard time making that project viable if metal prices collapse, even if the planned mine has a low strip ratio. Their other projects are still exploration targets with no 43-101 data although a couple of their drill results show promising Au grades. Dart Mining is benefiting from local government grants that help fund its early exploration program, which is undeniably helpful in conserving investors' cash.
Their 2012 annual report shows their burn rate has doubled to over $1M/year since they stepped up their drilling programs. They had just under $3.5M in cash on hand on June 30, 2012, giving them about three and a half years in which to strike valuable grades at any of their active projects.
Dart Mining trades under a dime right now but they have plenty of time to discover valuable deposits. I'd like to see what their drilling programs find later in 2013.
Full disclosure: No position in Dart Mining at this time.
Sunday, December 30, 2012
Imperial Metals (IPMLF) Is Not The Miner For Me
Imperial Metals (IPMLF / III.TO) has two operating mines and several developmental and exploration properties. I'd prefer to analyze them using value investing criteria since they are not a startup mining company, but some details of their properties deserve mention.
Their Mount Polly mine is operating but its 2P reserves are very low grade. I'd say the same for their Huckleberry mine. The MII resource grade at their Red Chris developmental project is similarly unimpressive. What are their cash costs of production? I have no idea, but I wonder whether these projects would be worth doing if the price of gold were half of what it is today. The Sterling project, however, has a very impressive 7.41 g/t Au, so here's hoping they get it started. It's too early to tell whether their three exploration properties will pan out.
Imperial is earning positive net income but their five-year EPS growth is negative and their five-year ROE is below the mining sector's average. Those are reasons enough for me not to own this stock, besides the low ore grades for their active mines.
Full disclosure: No position in Imperial Metals at this time.
Thursday, December 27, 2012
Ivanhoe Australia (IVHOF) Continues Multi-Metal Exploration
Ivanhoe Australia (IVHOF / IVA.TO) is digging for copper, gold, and other metals in, well, you guessed it, Australia. It's still majority-owned by Turquoise Hill Resources, and you can read my analysis of that company. I like the Ivanhoe Australia management team's breadth of experience in mining, and the CEO is a hot chick (not that it matters, but it's nice to see hot chicks anywhere).
Their Osborne Operation is producing; their Mount Elliott project has MII resources (but with low grades); their Merlin project has the potential to be an important source of rhenium (and has some existing infrastructure); and their Mount Dore project is still in exploration. I would like to see more clarity on 2P reserves.
Their financial statements for September 30, 2012 show $17M cash on hand and net losses of $7.7M/month that quarter. I didn't average that burn rate with their nine-month rate because it is significantly lower than what they burned for the entire nine-month period, representing a qualitative shift in their operations. It remains to be seen whether this reflects an effort to conserve cash for future exploration and infrastructure development. Besides, they have little to worry about because they recently had a very successful capital raise.
I'm not investing in this company because I'm not clear on which of their projects will ultimately be successful enough to drive the company's valuation. I'll wait for more definitive results.
Full disclosure: No position in Ivanhoe Australia at this time.
Their Osborne Operation is producing; their Mount Elliott project has MII resources (but with low grades); their Merlin project has the potential to be an important source of rhenium (and has some existing infrastructure); and their Mount Dore project is still in exploration. I would like to see more clarity on 2P reserves.
Their financial statements for September 30, 2012 show $17M cash on hand and net losses of $7.7M/month that quarter. I didn't average that burn rate with their nine-month rate because it is significantly lower than what they burned for the entire nine-month period, representing a qualitative shift in their operations. It remains to be seen whether this reflects an effort to conserve cash for future exploration and infrastructure development. Besides, they have little to worry about because they recently had a very successful capital raise.
I'm not investing in this company because I'm not clear on which of their projects will ultimately be successful enough to drive the company's valuation. I'll wait for more definitive results.
Full disclosure: No position in Ivanhoe Australia at this time.
Ivanhoe Mines Is Now Turquoise Hill Resources
Name changes happen all the time in the junior resource sector. Turquoise Hill Resources (TRQ / TRQ.TO) was known as Ivanhoe Mines until August 2 of this year. This capped off a series of corporate changes set in motion when Rio Tinto backed a $1.8B credit facility to support their Mongolian projects.
The entire management team is now a slate of Rio Tinto top shelf talent. I can easily forgive the lack of specificity of their mining backgrounds because they are obviously setting a much larger plan into motion.
The technical report for the development of their Oyu Tolgoi copper-gold project in Mongolia is thorough. If Rio Tinto is confident enough in its potential to operate the project as a strategic partner then there's probably something big there. Their production plan assumes a long-term average price of $850/oz for gold, which is about $200 higher than gold's real average price for the past 40 years. The projected mine life of 27 years (potentially 59 years) is huge, but their estimated grades of Au are shockingly low. It's even more shocking in light of the plan's estimate that mining can recover 79% of the Au, below the typical industry expectation of 85%. This is a bet on the size of a deposit rather than grade.
One look at TRQ's option chain tells me that someone is very optimistic about the company's long run valuation, with hundreds of open positions in January 2014 calls at strike prices of $10 and up. That is a very welcome development in light of the Rio Tinto backing.
I'm not sure about going long TRQ given the riskiness of doing business in Mongolia. The Mongolian government owns 34% of the Oyu Tolgoi project. Counting on credits from gold production to subsidize the cash cost of producing copper is also a risk, as those two metal prices don't necessarily move in tandem. They also have other exploration projects that may or may not pan out. Still, the momentum behind the Mongolian project is undeniably large and may very well sustain the entire company's valuation. I may decide at some point to sell cash-covered puts under TRQ now that the Oyu Tolgoi project is ready to contribute earnings.
Full disclosure: No position in Turquoise Hill Resources at this time, although that may change in the near term.
The entire management team is now a slate of Rio Tinto top shelf talent. I can easily forgive the lack of specificity of their mining backgrounds because they are obviously setting a much larger plan into motion.
The technical report for the development of their Oyu Tolgoi copper-gold project in Mongolia is thorough. If Rio Tinto is confident enough in its potential to operate the project as a strategic partner then there's probably something big there. Their production plan assumes a long-term average price of $850/oz for gold, which is about $200 higher than gold's real average price for the past 40 years. The projected mine life of 27 years (potentially 59 years) is huge, but their estimated grades of Au are shockingly low. It's even more shocking in light of the plan's estimate that mining can recover 79% of the Au, below the typical industry expectation of 85%. This is a bet on the size of a deposit rather than grade.
One look at TRQ's option chain tells me that someone is very optimistic about the company's long run valuation, with hundreds of open positions in January 2014 calls at strike prices of $10 and up. That is a very welcome development in light of the Rio Tinto backing.
I'm not sure about going long TRQ given the riskiness of doing business in Mongolia. The Mongolian government owns 34% of the Oyu Tolgoi project. Counting on credits from gold production to subsidize the cash cost of producing copper is also a risk, as those two metal prices don't necessarily move in tandem. They also have other exploration projects that may or may not pan out. Still, the momentum behind the Mongolian project is undeniably large and may very well sustain the entire company's valuation. I may decide at some point to sell cash-covered puts under TRQ now that the Oyu Tolgoi project is ready to contribute earnings.
Full disclosure: No position in Turquoise Hill Resources at this time, although that may change in the near term.
Friday, December 21, 2012
Curis Resources (PCCRF) and Copper
Curis Resources (PCCRF / CUV.TO) is part of the Hunter Dickinson family of companies. Curis wants to mine copper in Arizona. Let's see what they're doing about that.
They're pursuing a novel approach to copper recovery from their Florence Copper project in Arizona. They plan to use in-situ water injection into wells that will force copper-laden solutions to the surface for processing. Photos of the site show sufficient infrastructure in place (water, power, roads). This may very well be the most environmentally benign mining operation I've seen in several years of examining junior mining companies.
The headache I often have with these types of companies is with the way they structure their project. They bury the project information so deep in the Florence Copper website that it's difficult to identify the management team or ascertain whether there's a 43-101 report with proven and probable resources. That means I can't pass judgment on whether this copper project can live up to whatever potential it may have until I find those items. I also can't find any SEC filings for Curis Resources, which is odd for a publicly traded company. Let's see some verifiable facts besides the typical brochure stuff.
Full disclosure: No position in Curis Resources at this time.
They're pursuing a novel approach to copper recovery from their Florence Copper project in Arizona. They plan to use in-situ water injection into wells that will force copper-laden solutions to the surface for processing. Photos of the site show sufficient infrastructure in place (water, power, roads). This may very well be the most environmentally benign mining operation I've seen in several years of examining junior mining companies.
The headache I often have with these types of companies is with the way they structure their project. They bury the project information so deep in the Florence Copper website that it's difficult to identify the management team or ascertain whether there's a 43-101 report with proven and probable resources. That means I can't pass judgment on whether this copper project can live up to whatever potential it may have until I find those items. I also can't find any SEC filings for Curis Resources, which is odd for a publicly traded company. Let's see some verifiable facts besides the typical brochure stuff.
Full disclosure: No position in Curis Resources at this time.
Thursday, November 29, 2012
Figuring Out Mines Management (MGN)
Mines Management (MGN) deserves my attention today. I always look for management that's truly experienced in the mining sector. Their current management team is heavy on finance and general corporate work but could benefit from more than just one principal officer who's a geologist.
Their Montanore project in Montana looks promising if they can get a final 2P estimate. It's fairly close to existing roads, so the site may be viable if they can solve any extant water problems and get approval for a power transmission line. It's important to note that their estimates use a long-term silver price of $6.24/oz, which is far more realistic than the current spot price of over $34/oz for a mine with an expected long life. If the inferred grade of about 2oz/ton Ag doesn't improve with further drilling and analysis, then MGN will have to keep its cash cost of production under $12/ton for this mine to be viable. Granted, the same dirt also has copper so they may have some wiggle room on cash costs.
Their La Estrella project in Peru is not as well-explored as the Montana project. Preliminary drilling results show 1.0g/t Au may be available, which is not terribly exciting but may be the new normal given the declining grade quality of new mines worldwide. That makes it worth pursuing.
The financial results so far have been disappointing. A review of their Q3 2012 10-Q reveals the company's candor about risk factors such as lack of 2P reserves and the likelihood of continued losses. Their burn rate appears to be at least $8M/year, and with less than $12M cash on hand as of this past September they'll have to raise more capital by December 2013.
I kind of like this one, even though the Peru project looks like a hedge on the Montana project's viability. Montanore doesn't need that much more work to get started if the final NI 43-101 confirms some decent reserves. I'll pay attention to whatever final data they publish.
Full disclosure: No position in MGN at this time.
Their Montanore project in Montana looks promising if they can get a final 2P estimate. It's fairly close to existing roads, so the site may be viable if they can solve any extant water problems and get approval for a power transmission line. It's important to note that their estimates use a long-term silver price of $6.24/oz, which is far more realistic than the current spot price of over $34/oz for a mine with an expected long life. If the inferred grade of about 2oz/ton Ag doesn't improve with further drilling and analysis, then MGN will have to keep its cash cost of production under $12/ton for this mine to be viable. Granted, the same dirt also has copper so they may have some wiggle room on cash costs.
Their La Estrella project in Peru is not as well-explored as the Montana project. Preliminary drilling results show 1.0g/t Au may be available, which is not terribly exciting but may be the new normal given the declining grade quality of new mines worldwide. That makes it worth pursuing.
The financial results so far have been disappointing. A review of their Q3 2012 10-Q reveals the company's candor about risk factors such as lack of 2P reserves and the likelihood of continued losses. Their burn rate appears to be at least $8M/year, and with less than $12M cash on hand as of this past September they'll have to raise more capital by December 2013.
I kind of like this one, even though the Peru project looks like a hedge on the Montana project's viability. Montanore doesn't need that much more work to get started if the final NI 43-101 confirms some decent reserves. I'll pay attention to whatever final data they publish.
Full disclosure: No position in MGN at this time.
Friday, March 30, 2012
Tosca Mining (TSMNF) Digs Tex-Mex Dirt From Vancouver
I got an unsolicited email from somebody who wants me to check out Tosca Mining (TSMNF), another penny stock from Vancouver, Canada. This person didn't disclose whether they had a relationship with the company but they urged me to check out some analyst's video. I don't waste time listening to someone else's analysis. My own thinking is like so totally way better.
If you can follow the oddities of my post's title, you may be able to guess that Tosca is a Vancouver-based company digging a project in Texas near the Mexican border. Many larger firms have tried here to no avail. If all of those major operators couldn't find economically viable ore grades after two decades of exploratory drilling, I have no idea how a small driller is going to accomplish anything. It's nice to see that the CEO and other execs are real geologists and miners. The company has been around since at least 2007 according to its SEDAR filing history but presently has little success to show for its history. Five years should be long enough for even lifelong miners to figure out that a property explored for decades probably has questionable value.
Please note that the share structure will eventually result in massive shareholder dilution if the company makes any progress towards operating a successful mine. Really good news will make the share price rise but will also risk triggering activation of warrants; the new equity will thus dissipate over a larger number of shares. The work done so far on site is very limited, with holes that have very small traces of mineralization. The 43-101 estimate Tosca released last month has no estimate of proven and probable reserves.
The chance of success for Tosca's sole project is not strong enough to be worth my further attention. I'd rather not risk massive dilution.
Full disclosure: No position in TSMNF, ever.
If you can follow the oddities of my post's title, you may be able to guess that Tosca is a Vancouver-based company digging a project in Texas near the Mexican border. Many larger firms have tried here to no avail. If all of those major operators couldn't find economically viable ore grades after two decades of exploratory drilling, I have no idea how a small driller is going to accomplish anything. It's nice to see that the CEO and other execs are real geologists and miners. The company has been around since at least 2007 according to its SEDAR filing history but presently has little success to show for its history. Five years should be long enough for even lifelong miners to figure out that a property explored for decades probably has questionable value.
Please note that the share structure will eventually result in massive shareholder dilution if the company makes any progress towards operating a successful mine. Really good news will make the share price rise but will also risk triggering activation of warrants; the new equity will thus dissipate over a larger number of shares. The work done so far on site is very limited, with holes that have very small traces of mineralization. The 43-101 estimate Tosca released last month has no estimate of proven and probable reserves.
The chance of success for Tosca's sole project is not strong enough to be worth my further attention. I'd rather not risk massive dilution.
Full disclosure: No position in TSMNF, ever.
Saturday, January 21, 2012
More Wind Out Of China's Sails
Writing "sales" instead of "sails" in this post's title might have been a cute play on words, but I don't feel like being all that cute today on the subject of China's continuing disappointments. Manufacturing activity in China continues to slow down. Europe's malaise is hitting China's exporters hard and the eurozone hasn't even fallen apart (yet). The world copper price hasn't responded to this news, so perhaps Dr. Copper has decided to defy commodity analysts' wisdom and become a lagging indicator. Steel futures indicate strong future demand, which no longer makes any sense at all. Dude, like manufacturers use steel and copper, okay? So, like, the prices should be cratering rather than meandering sideways or setting new highs. This kind of action proves the old adage that the only people who make serious money in commodities markets are the brokers of transactions, not the investors going long or short.
The price of FXI hasn't factored in this bad news from China. I'll renew my covered calls but I may be forced to eat a realized long-term loss as the market price went through my calls' strike price. It all depends on how my brokerage calculates the purchase date for which shares will ultimately be sold off. I can console myself with the reminder that the cash I've generated from years of covered call writing has built up a war chest I have yet to deploy. More bad news out of Europe, China, and elsewhere will eventually give me the bargain opportunities I seek. The waiting game is one I can play endlessly.
Full disclosure: Long FXI with covered calls.
Monday, December 12, 2011
Hoarding And Stealing Dr. Copper
Hard assets devotees believe commodities help diversify a portfolio. Some people take this to extremes. Penny hoarders accumulate mini-mountains of the copper coinage in the hope that the coins' metal content is a better investment than the face value of the currency. Folks are plotting ROIs on proposed changes in federal law that would allow them to liquefy these assets for their melt value. That seems like a very long-shot chance but high copper prices encourage people to try their luck.
Hoarding copper pennies is a benign form of investing in liquid hard assets. They would be useful in a hyperinflationary scenario if low-denomination currency became worthless and copper recyclers were willing to risk melting them down. The second-hand copper market may already tolerate lawlessness given the sharp rise in recent incidents of copper theft. All of those torn-out copper wires, pipes, and fixtures are going somewhere. There's a buyer for every seller. I'm disappointed that law enforcement agencies aren't staking out metal recycling centers.
Penny pinching is one thing; penny hoarding is a big thing. There can be too much of a good thing.
Nota bene: This author does hold a small amount of pennies, in a tin can at the world headquarters of Alfidi Capital. They are currency, not a spare store of metal. I typically drop a few into the hats of street musicians in San Francisco, especially if they're talented.
Hoarding copper pennies is a benign form of investing in liquid hard assets. They would be useful in a hyperinflationary scenario if low-denomination currency became worthless and copper recyclers were willing to risk melting them down. The second-hand copper market may already tolerate lawlessness given the sharp rise in recent incidents of copper theft. All of those torn-out copper wires, pipes, and fixtures are going somewhere. There's a buyer for every seller. I'm disappointed that law enforcement agencies aren't staking out metal recycling centers.
Penny pinching is one thing; penny hoarding is a big thing. There can be too much of a good thing.
Nota bene: This author does hold a small amount of pennies, in a tin can at the world headquarters of Alfidi Capital. They are currency, not a spare store of metal. I typically drop a few into the hats of street musicians in San Francisco, especially if they're talented.
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