J Taylor’s WWW.MININGSTOCKS.COM
Weekly Hotline Message (Now in our 25th Year) April 21, 2007
New Buy Recommendation
Nevada Copper Corp.
Business: Developing a world-class copper mine in Nevada
Canadian Dollars
Traded TSX: NCU
Price 4/20/07: US$2.40
Shares Outstanding: 30.8 Million
Market Capitalization: US$74 Million
Cash: C$4.1 Million
Fully Diluted: 41.9 Million
Cash on Exercise: C$12.5 Million
43-101 Copper Resource: 6.1 Billion lbs.
Iron Ore: 100 Million Tonnes
Progress Rating: “B”
Telephone: 1-877-687-5755
Web Site: www.nevadacopper.com
Keep in mind that as we make new recommendations these days, we are looking for stocks that we think have a very good chance of doubling within one year. Assuming our Inflation/Deflation Watch remains on the rise, as it has since we created it in January 2005, we think Nevada Copper Corp. (NCU) is a company that could see its shares rise by two- or threefold in the next 12 months. Let me explain.
The Pumpkin Hollow Copper Deposit was discovered by U.S. Steel in 1960. It is located about 1½ hours south of Reno, Nevada. Over the next 30 years, major companies in addition to U.S. Steel, such as Anaconda, Cyprus, and Conoco, spent over $40 million to explore and develop the project. During that time frame, 590,000 ft. of drilling was carried out as well as extensive metallurgical and mine engineering. Economic studies were also completed. This was indeed going to become a mine before the bottom fell out of metals prices. As might be expected given major company work done on the property, the quality of the work was outstanding, which helped management quickly establish a 43-101 compliant resource in a very short time frame.
A New Company Not Yet Known Means Opportunity for You
It was only in August 2006 that Nevada Copper Corp. was established, which explains in part why this stock appears to still be very undervalued. Though the deposit already has a 6.1-billion-pound resource, management believes this can be expanded considerably further. As such, it has extended its original claim area that contains the 6.1 billion pounds to over 11 square miles. In fact, there is a considerable amount of copper in this district. Anaconda produced 2 billion pounds from the district from 1953 through 1978, and in addition to the 6.1 billion pounds at Pumpkin Hollow, another 8 billion pounds was found in other porphyry deposits in the district.
We should add that there are some significant amounts of iron ore and gold that may well provide some very significant credits to this project. There is at least 100 million tons of mineable iron that has been identified on the project. Overall, the project so far includes three high-grade underground copper targets and three open-pit copper-iron targets. The thinking at this stage is that initial mining of the higher-grade underground targets will provide significant cash flows to expand the project to mine the open-pit projects later on.
Early Economic Picture
Of course, the economics will come more accurately into focus with the feasibility study scheduled to begin in the fourth quarter of this year. A significant amount of work is going to be carried out this year to upgrade some of the existing 3.4 billion pounds of copper from an inferred resource to the measured and indicated category, and I understand that management will also be seeking to increase the dimensions of the deposit.
While we will see more clearly the economics of this project as the feasibility study progresses, keep in mind that with an enormous amount of past work carried out on Pumpkin Hollow, we are not flying blind with respect to the prospects for this project. At this stage, a 3,000-tonne-per-day operation is envisioned that would produce 65 million pounds of copper per year at a cost of around $0.60 per pound. Obviously, with copper currently selling at around $3.50 per pound, this project could potentially provide very good margins for NCU.
Capital expenditures should come in at around $160 million to $170 million, with initial mining being from two and possibly three underground targets. Bulk-mining methods would be employed to go after higher-grade material grading on average something north of 0.75% copper plus significant iron and gold credits. Actually, the thinking is that the underground values could be meaningfully higher, given recent drilling. Certainly there are some much higher-grade areas, such as 12.1 million tons grading 3.41% copper + 22% magnetite.
The Project Time Line and Upside Potential
During 2007, in-fill drilling and step-out drilling is scheduled to take place, and then the start of feasibility and permitting is to start in the fourth quarter. Feasibility is to be completed in Q3 2008, at which time mine permitting is scheduled to begin. By 2010, surface construction is scheduled, and production is to take place in 2011. Of course, we do not expect to necessarily hold this stock until it goes into production, because most often, the lion’s share of profit is made as the project is developed through feasibility. Often the biggest bang for your buck comes from initial discovery, but the Pumpkin Hollow Project was discovered long ago by major mining firms that normally do little to advertise their new discoveries. That fact combined with this story being brand new means the market simply hasn’t yet begun to fully price this project.
How much should Nevada Copper Corp. be worth at this time? Its peers are often selling for 3 cents to 4 cents per pound in the ground. NCU is currently selling at slightly less than 1 cent per pound of copper in the ground. Many of its peers are in much riskier political environments and do not have ready infrastructure in place. Nevada is arguably about as safe geopolitically as any project in the world and except for the purchase of some of the water the project will require, there are no infrastructure concerns at all. Also, the quality of work that has been carried out in the past by the major companies that worked at Pumpkin Hollow is considered to be impeccable. Adding all those advantages together you might expect this project could command a premium valuation over its peers. But even if that is not the case, on the basis of its peers selling at 3 to 4 cents in the ground, we believe this stock has the potential to triple or quadruple over the next year or two. As feasibility work progresses, and if significant values for iron and copper demonstrate they can enhance the economics, and if as we expect the project moves favorably through feasibility, it could command a higher premium still. But at this juncture, when we ask ourselves whether we can see the potential for a double within the next year, we have no problem answering in good conscience, “yes.”
Management
Giulio T. Bonifacio, President and CEO – Mr. Bonifacio is a professional accountant with more than 23 years of experience in senior executive positions with several mid-sized mining and exploration companies. With extensive public company expertise, Mr. Bonifacio has an in-depth knowledge of financial, regulatory, and acquisition related matters. Mr. Bonifacio has also been involved in or led several equity and debt financings over this timeframe.
Joe Kircher, Vice President and COO – A mining engineer with more than 20 years of experience building and operating mines in North America, Mr. Kircher has held senior executive positions with both senior and junior mining companies including COO, VP operations, and general manager. Mr. Kircher has extensive development and operating expertise at both open-pit and underground mines, with the design and construction of three mining complexes to his credit.
Joe Chan, Vice President and CFO – Mr. Chan is a professional accountant with more than 25 years of accounting, administration, and system experience in the mining industry. From 1992 to 2002, Mr. Chan held various positions with Teck Cominco Limited, including six years as controller for its wholly owned subsidiary Quintette Operating Corporation and four years in a senior financial role for its US$2.5 billion Antamina Copper Project in Peru. Mr. Chan has served in senior financial roles for various public companies since 2003.
Greg French, Project Manager – Mr. French is a geologist with 25+ years of exploration experience in the western U.S. and Canada. He has worked in various capacities for Homestake Mining Co., Atlas Precious Metals, and Cornerstone Industrial Minerals, as well as consulting for numerous junior mining companies. Mr. French has a Nevada gold discovery to his credit and extensive project development experience including two projects taken through feasibility and production.
Brian Kirwin, Non Executive Chairman – An accomplished mining executive and explorationist at both senior and junior mining companies, Mr. Kirwin has had leadership positions in various capacities from CEO to VP exploration, with 20+ years of experience evaluating deposits, mines, and risk worldwide. Mr. Kirwin, a geologist, has three gold discoveries in Nevada to his credit.
Damien Reynolds, Director – Mr. Reynolds has been involved in the resource sector for more than 20 years. He has gained industry knowledge through founding, investing in, and serving on the boards of a number of public exploration and mining companies. Mr. Reynolds has an impressive track record with projects of merit around the world and also for his ability to raise capital in the resources sector.
Joe Giuffre, Director – Mr. Giuffre has 18+ years of combined experience in business and legal matters, and has a transaction-based practice in the areas of corporate finance, securities, mining, corporate structuring, project finance, and mergers and acquisitions. Mr. Giuffre has extensive experience acting for Canadian public companies with an international focus, many of which have progressed from private start-up companies to publicly-listed emerging companies trading on the TSX Venture Exchange, the Toronto Stock Exchange, American Stock Exchange, or NASDAQ.
Foster Wilson, Director – Mr. Wilson is the president and CEO of Mesa Uranium Corp., a uranium exploration company. Mr. Wilson has 23+ years of experience in exploration and development projects ranging from reconnaissance to definition drilling, ore reserve estimation, and feasibility studies. He also formerly worked with Placer Dome Exploration 1990–1999 and Echo Bay Exploration 1985–1990.
SUMMARY
We base our optimistic views for Nevada Copper Corp. of course on management carrying out its business plan successfully and on continued stability, if not strength and upward motion in the price of copper, and to a lesser degree iron ore as well. With what we believe is a strong management team, we think the chances of success for investors buying this stock at or around its current prices are high, though of course we once again want to remind you that investing in equities is risky business, even if the notion these days is to the contrary. As such, we want to remind you of our strongly held view that you should not allocate more than 5% of your portfolio into this or any other one stock. Our target price for Nevada Copper is US$4.80 by this time next year. If we achieve that, your 5% allocation will sweeten your equity pot quite nicely.
For further information call:
Longview Capital Partners
Attention: Eugene Toffolo
Phone: 604-681-5755
Tollfree: 1-877-687-5755
Quelle: http://www.nevadacopper.com/i/misc/JayTaylor.pdf
