Los Calatos: Targeting a smaller scale development option

Transcription

METMINCO LIMITED
Research Note
LOS CALATOS: TARGETING A SMALLER SCALE DEVELOPMENT OPTION
Investment Highlights
3 February 2015

12mth Rating




Los Calatos: Targeting a Smaller Scale Development Option: MNC
is targeting higher grade zones within the Los Calatos Complex with the
aim to investigate a smaller scale, higher grade mining operation with a
lower capital cost. The Company has recently conducted a detailed drill
core re-logging program with an updated Mineral Resource due in March
2015. MNC suggests from work conducted to date that two continuous
high grade zones exist. Once the resource is completed then MNC plans
to conduct a Preliminary Economic Assessment (PEA) to provide economic
parameters around the smaller scale scenario.
A$
A$
%
0.008
0.04
400
RIC: MNC.AX
Shares o/s
Free Float
Market Cap.
Cash
Net Debt/Equity
3m Av. D. T’over
52wk High/Low
m
%
A$m
A$m
%
A$
A$
BBG:MNC AU
1,855.5
85.6
14.9
1.2
na
11,386
0.036/0.006
Valuation:
Methodology
Value per share
Global Peer Cu Comps
A$
0.04
Analyst:
(+61 8) 9225 2816
Email:
[email protected]
Disclosure: The preparation of this report
was funded by the Company in accordance
with the terms of an agreement with
Patersons. This report was prepared by
Patersons and not by the Company.
Mollacas: Medium Term Development Option: MNC is targeting
small-scale copper production from its Mollacas copper leach project in
Chile. Unfortunately the Mollacas project is currently the subject of a legal
dispute with development activities currently delayed. A decision on the
dispute by the Chilean Constitutional Tribunal is expected shortly. The
results of a scoping study in early 2014 showed an initial 7 year mine life
with production of up to 8,000tpa of copper cathode with low upfront
capital (US$47.1m) and cash costs of US$1.23/lb Cu. MNC determined an
NPV @ 8% of US$74.9m and IRR of 37.2% for the project, which was
calculated at a US$3.10/lb copper price.
Looking to Acquire a Near-Term Development Asset:
stated that it is in various stages of discussions with third
relation to a number of merger and acquisition opportunities
South America in line with its stated objectives of acquiring a
cash flow asset.
MNC has
parties in
located in
near term
Cash Position of $1.2m: MNC had $1.2m in cash at the end of
December 2014. The Company has postponed its Bergen funding facility
which extends over a 24 month period at $250k per month. Further
funding will likely be required in the short to medium term.
Catalysts: 1) Near Term: Decision by the Chilean Constitutional
Tribunal in relation to mine access dispute at Mollacas. 2) March 2015:
Los Calatos Resource Update 3) Mid-2015 Los Calatos PEA results for
smaller scale development option.
Simon Tonkin
Phone:
12 Month Share Price Performance
0.040
45000
0.035
40000
35000
0.030
30000
0.025
25000
0.020
20000
0.015
15000
0.010
10000
0.005
0.000
Performance %
Absolute
Rel. S&P/ASX 300
Volume '000

Valuation $0.04/sh: We have revisited our valuation following the
recent fall in the copper price and the weaker interest in the general
resources market. The net result of these macro factors is our target price
has reduced to $0.04/sh (from $0.07/sh). The major impact has come
from the weak resources market which has resulted in a 40% fall in Global
copper comparatives. We have valued the Los Calatos project based on a
global peer comparison using an EV/lb of Cu Eq. resource. We have
excluded Mollacas from our valuation to remain conservative until the legal
proceedings over the Mollacas project are resolved.
SPEC BUY
Price
Target Price
12m Total Return
Share Price A$

Metminco Limited’s (MNC) Los Calatos Cu-Mo porphyry project in
Peru is a significant copper deposit on a global scale. We
estimate its resource of 1.4bt at 0.47% Cu and 0.022% Mo ranks
in the top 25 global copper projects under pre-feasibility in terms
of contained metal. However, the upfront capital cost of $1.3bn
is a significant hurdle for the projects development, especially in
the current copper price environment.
Therefore, MNC is
investigating an alternative development option by targeting a
smaller scale higher grade mining operation with lower upfront
capital cost requirements.
We expect an updated Mineral
Resource in March and Preliminary Economic Assessment (PEA)
by mid-2015. We rate MNC a Speculative Buy.
5000
0
12 Months
1mth
-25
-24
3mth
-50
-39
12mth
-80
-63
RESEARCH NOTE – PATERSONS SECURITIES LIMITED
All information and advice is confidential and for the private information of the person to whom it is provided and is provided without any responsibility or liability on any
account whatsoever on the part of this firm or any member or employee thereof.
1
3 February 2015
Metminco Limited
We continue to rate Metminco Limited (MNC) as a Speculative Buy. We have revisited our valuation
following the recent fall in the copper price and the weaker interest in the general resources market. The net
result is our target price has reduced to $0.04/sh (from $0.07/sh). The major impact has come from macro
factors which has resulted in a weak copper market with a 40% fall in Global copper comparatives (EV/lb
resource). There was also some dilution related to the Bergen working capital facility. We explain these in
further detail below:
PEER COMPARISON
We have updated our global peer comparatives which suggest the EV/lb resource for large global low grade
copper projects has fallen from 0.794c per pound to 0.49c per pound (Figure 1). We believe this comparative
of global large low grade copper deposits provides a more accurate value rather than using our general
Australian copper explorers/developers tables, which generally have much smaller and higher grade projects.
In our analysis, we have included only projects that are at scoping study/pre-feasibility study level. The result
is an average EV(¢)/lb resource of 0.49¢/lb which we apply to Los Calatos’s 17Blb Cu Eq. resource to achieve
a value of $84.8m.
Figure 1: Peer Comparison of Global Copper Projects with Large Low Grade Deposits (Scoping Study/Pre-Feasibility)
Company Name
Ticker
Exchange EV (A$m)Project Name
Metals
Status
McEwen Mining Inc.
NGEx Resources Inc.
MUX
NGQ
NYSE
TSX
Duluth Metals Limited
Northern Dynasty Minerals Ltd.
Western Copper and Gold Corporation
Los Andes Copper Ltd.
Marengo Mining Limited
Candente Copper Corporation
Metminco Limited
DM
NDM
WRN
LA
MRN
DNT
MNC
TSX
TSX
TSX
TVX
TSX
TSX
ASX
Cu/Au/Ag
Cu/Au/Ag
Cu/Au/Ag
Cu,Ni,Pt,Pd,Au
Cu/Au/Ag/Mo
Cu/Au/Ag/Mo
Cu/Mo
Cu/Mo/Au/Ag
Cu/Au/Ag
Cu/Mo
Pre-feasibility
Scoping
Scoping
Scoping
Scoping
Feasibility
Scoping
Feasibility
Feasibility
Scoping
435 Los Azules
147 Josemaria
Los Helados
75 Twin Metals
43 Pebble
39 Casino
32 Vizcachitas
32 Yandera
15 Canariaco Norte
15 Los Calatos
Mt
Cu Eq. (%)Cu Eq (Mlb) EV/lb (Ac/lb)
1,786
1,152
2,926
1,631
10,777
1,788
1,356
1,311
1,296
1,419
0.54
0.49
0.47
0.56
0.64
0.34
0.41
0.22
0.45
0.54
21,334
43,191
30,635
20,062
153,059
13,246
12,207
6,255
12,830
17,037
Avg
Avg (ex MNC)
2.04
0.34
0.37
0.03
0.30
0.26
0.50
0.11
0.09
0.45
0.49
Source: Patersons Securities Limited
VALUATION
We have conducted a sum-of-the parts valuation on MNC. The result is a valuation of $0.04/sh (Figure 2).
We have placed a value on the Los Calatos Cu/Mo project of $84.8m based on our global large low grade
copper peer analysis (Figure 1). We determine this value by applying the global peer average of EV/lb
resource of 0.49¢ to the Los Calatos Cu Eq. resource of 17Blb Cu Eq.
Figure 2: MNC Valuation Table
Base Case
$m
Risk
Factor
Mollacas NPV @ 12%
$54.4
0%
Los Calatos (Peer EV/lb resource) $84.8 100%*
Exploration
$0.0
Other Projects
$5.0
Corproate Overheads
-$8.2
Unpaid Capital
$2.0
Cash
$1.2
Total Net Asset Value
$139.2
$/sh
$0.00
$0.04
$0.00
$0.00
$0.00
$0.00
$0.00
$0.04
We have chosen to exclude the Mollacas copper project from our base case valuation. Our reasoning is that
MNC are currently in dispute with the landowner over access rights and further work is needed to resolve this
issue. However, we note that we have conducted a scenario whereby Mollacas is included in our valuation
and funded 70:30 debt to equity. The result is our valuation increases to $0.047/sh. The reason the increase
is not higher is the dilution from an assumed equity raise of $14m at the current share price. We have used a
higher discount rate of 12%, rather than the 8% used in the updated scoping study, due to the current phase
of development. We have given MNC a nominal $5m for its other projects. MNC had cash of approximately
$1.2m as at 31 December 2014. Given that MNC intends to spend $1m in the next quarter further funding
avenues will be needed. We have assumed a $2m raising at the current share price to provided sufficient
funding for the rest of 2015.
2
3 February 2015
Metminco Limited
RECENT M&A SUGGESTS LOS CALATOS HAS POTENTIAL FOR SIGNIFICANT
VALUE
Mergers and Acquisitions (M&A) within the Peruvian copper space have been very active over the past 7 years
with some significant sums paid for quality large, low grade copper porphyry projects. Similar sized projects
to Los Calatos have achieved values in the range of US$390-455m. If we use the average takeover value of
$0.042/lb of resource and apply it to the Los Calatos project we calculate a potential value of US$714m in a
takeover scenario (Figure 3). Based on the lowest acquisition price of $0.01/lb we calculate a value of
US$170m which is well above MNC’s current market capitalisation. The most recent Peruvian transaction was
the Las Bambas mine which was acquired for $5.8b or $0.25/lb Cu Eq. in August 2014. This is significantly
higher than the other transactions outlined in the Figure 1 due to the fact the mine is currently in construction
and significant amount of the $6bn capital costs have been sunk. Therefore, we have included the
transaction for completeness but have excluded it from the average. We note the most recent large copper
porphyry transaction in South America was in Argentina when First Quantum acquired Lumina Copper who
owned the Taca Taca project. The consideration was C$470m in cash and shares which suggests a value of
$0.014/lb based on the projects resource (Indicated and Inferred).
Figure 3: Major Copper M&A in Peru including Taca Taca Project (Argentina)
Date
Deposit Name
Commodities
Target
Acquirer
Deal Value
(US$m)
19/08/2014
13/04/2014
13/06/2012
10/01/2011
18/10/2010
1/03/2010
6/12/2007
11/06/2007
30/04/2007
5/02/2007
Average
Taca Taca (Argentina)
Las Bambas
Marcobre S.A.C.
Constancia
Haquira
Mina Justa
Galeno
Toromocho
Michiquillay
Rio Blanco
Cu/Au/Mo
Cu/Mo/Auu
Cu/Au/Ag
Cu/Au/Mo
Cu/Mo/Au/Ag
Cu/Au/Ag
Cu/Au/Mo
Cu/Mo/Ag
Cu
Cu/Mo
Lumina Copper
Glencore
CST Mining Group Ltd
Norsemont Mining Inc
Antares Minerals Inc
Chariot Resources Ltd
Northern Peru Copper Corp
Peru Copper Inc
Centromin
Monterrico Metals PLC
First Quantum Minerals Ltd
MMG Limited, GUOXIN
Minsur SA
HudBay Minerals Inc
First Quantum Minerals Ltd
China Sci-Tech Holdings Ltd
Jiangxi Copper Co Ltd,China Minmetals Corp
Chinalco Mining Corp
Anglo American PLC
Zijin Mining Group
Los Calatos
Cu/Mo
465.3
5850.0
505.0
370.3
390.2
234.6
455.0
789.2
403.0
174.3
963.7
Total Value Cu Eq. Deal ($/lb
Contained
(Blb)
Cu Eq.)
Resource
(US$Bn)
109
34.2
70
23.2
27
7.8
14
4.1
48
12.7
26
7.6
36
11.6
88
26.6
34
9.6
61
17.5
51
15.5
51
17.0
R& R
0.014
0.252
0.065
0.089
0.031
0.031
0.039
0.030
0.042
0.010
0.042
Given the large scale of the Los Calatos Cu/Mo project, it also commands a significant upfront capital
investment for development of $1.3bn. MNC is unlikely to be able to fund this alone, given its current market
capitalisation. Therefore, we see a significant opportunity for management to execute a deal to realise value
for shareholders. An outright sale will likely give investors the biggest short term upside. MNC recently
mentioned that they are holding discussions with a number of parties who have expressed interest in
investing in Los Calatos. The Company has also been considering the introduction of strategic partner to
assist in funding the project to completion of a Feasibility Study, however, this has yet to occur. This would
likely include a farm down of interest in the project and there may be some scope to fund the project debt
component using the partners’ balance sheet. Based on the existing timeframe the project is not expected to
reach production until at least 2020.
SMALLER SCALE MOLLACAS PROJECT HAS VALUE; NEEDS LEGAL CASE
RESOLVED
The Mollacas leach project in Chile is an attractive development opportunity. In March 2014, MNC released a
scoping study on the project which demonstrated a robust development opportunity with an NPV@8% of
US$74.9m and IRR of 37.2% at US$3.10/lb. Capital costs are low at $47.1m with production of ~14,500tpa
of copper. The legal issue that needs to be resolved is the access rights with a provincial court ruling in
favour of the surface landholder. MNC has since appealed the decision and the Chilean Constitutional
Tribunal has declared the Company’s lawsuit admissible. Should the Tribunal rule in favour of MNC, then,
among other matters, the Chilean courts will not be able to rely on the Court of Appeal’s interpretation of Civil
and Mining Codes. In particular Mining Code 15 on which the Court of Appeal relied when it determined that
the extension of an easement to permit mining activities cannot be granted without the surface title holder’s
permission should a ‘plantation’ exist in the specified area with its appeal accepted for admission to the
Chilean Tribunal. The Tribunal’s decision is expected in the short term.
3
3 February 2015
Metminco Limited
CORPORATE/CAPITAL STRUCTURE
MNC has 1,855.5m shares on issue with unlisted options of 9.5m at various exercise prices ranging from
$0.0302 to $0.21/sh with expiry dates between June 2015 to August 2017.
MNC had a cash balance of $1.2m at the end of December 2014 with an expected spend of $1m in the March
Q 2015. This consists of $0.6m on exploration and $0.4m on administration. Given MNC’s current cash
balance further avenues of funding will be needed in the short to medium term.
We note MNC has by mutual agreement with Bergen Global Opportunity Fund postponed the Bergen funding
facility (“Bergen”). Under the funding agreement MNC could have accessed the minimum funding of
$250,000 per month (expandable to $2m per month with agreement from Bergen) for up to 24 months
through the issue of MNC shares at 95% of the average of five daily VWAP’s chosen by Bergen during a
specified period immediately prior to the purchase date. MNC is able to terminate the funding agreement at
no cost and has the flexibility to pause the monthly share tranches.
We have removed further funding from the Bergen agreement from our financial model which had a positive
impact given that we had assumed share dilution from the planned maximum of $6m (without any pauses)
over 24 months at a 10% discount to the current share price. MNC has received total funding of $1.1m from
the facility which has resulted in the issue of 93.2m shares. The funding has been used for re-logging work at
Los Calatos, short term working capital and potential acquisition related costs, such as due diligence, expert
reports and documentation.
MNC’s major shareholders are Junior Investment Company (7.1%) and Directors and Management (7.3%).
4
3 February 2015
Metminco Limited
LOS CALATOS
The Los Calatos project, which covers an area of 275km2, is located in southern Peru on state owned land
approximately 80km to the southeast of Arequipa and 33km northwest of Moquegua. It is at an altitude of
approximately 2,900m above sea level. There are three large operating copper-molybdenum porphyry mines
in the area, namely Cuajone, Toquepala and Cerro Verde (Figure 4). Production from the mines in this region
is expected to double over the next few years to 1.3Mtpa of copper metal (7% of global supply) with the
proposed upgrade to the Toquepala, Cuajone and Cerro Verde mines. Molybdenum constitutes a significant
by-product of copper mining from this belt.
The Los Calatos project can be accessed via the Pan American Highway from Moquegua, and a 50km
unsealed road north of the highway to the project. The port of Ilo is located approximately 160km by road to
the southwest of the project area (Figure 4).
Figure 4: Los Calatos Location
Source: Metminco Limited
PROJECT OF NATIONAL INTEREST
In July 2013, the Peruvian Government approved a 450% increase (2,800ha to 12,700ha) in the area that
Hampton Peru (MNC’s Peruvian subsidiary that owns 100% of Los Calatos) may purchase under the Project of
National Interest designation. This will accommodate the surface infrastructure required to exploit the Los
Calatos porphyry copper – molybdenum deposit. The surface infrastructure required for the proposed mine
includes the open pit and underground workings, waste and ore stockpiles, plant, mine and administration
structures and a tailings dam. MNC has received confirmation that the Ministerio de Energia y Minas
(“MINEM”) will approve the reserve status over the area in question. This follows a technical evaluation of the
Company’s application by the Superintendencia Nacional de Bienes Estatales (“SBN”). Final notification from
MINEM is expected shortly.
5
3 February 2015
Metminco Limited
CORE RE-LOGGING PROGRAM
The mineralised porphyry system at Los Calatos is typical of the Andean style porphyry systems found in Chile
and Peru, with copper and molybdenum mineralisation being associated with both the porphyry and adjacent
wall rock. Recently. MNC undertook a significant drill core re-logging program which involved 125,000m of
drill core (108 drill holes). The program has identified a series of sub-vertical monzonite porphyry dykes and
associated anhydrite breccia complexes, which collectively form two elongated, NW-SE trending sub-vertical
bodies which contain the significantly higher Cu and Mo grades (Figure 5).
Figure 5: Section through the Los Calatos Porphyry Complex showing the position of the high grade breccia units.
6
3 February 2015
Metminco Limited
MINERAL RESOURCES
A significant Mineral Resource of 1.4Bt at 0.47% Cu and 0.022% Mo has been estimated for the project
(Figure 6). This is based on 134 drill holes totalling 125,376m, of which 103 drill holes intersected the
interpreted mineralised unit. The resource is split into that mineralisation which is amenable to open-pit
mining (to a depth of 700m), and a deeper underground bulk mineable resource.
The results of the recently completed drill core re-logging program will be used to calculate an updated
Mineral Resource in March 2015. It is envisaged that the three-dimensional wireframe modelling of the two
anhydrite breccia complexes (domains) in particular, is likely to facilitate the more constrained and less diluted
(smoothed) reporting of the Cu-Mo mineralisation at higher cut-off grades, which may result in the definition
of discrete zones of higher grade material that are amenable to smaller-scale bulk mining methods than those
considered in the current Optimised L3_Model.
Figure 6: Resource Estimate
TARGETING A SMALL SCALE DEVELOPMENT OPTION
The scoping study completed in March 2013 envisaged a large scale 24Mtpa operation with a 20 year mine
life. Pre-production capital costs were estimated to be US$1.3b and operating costs of US$1.12/lb. We had
previously identified the significant upfront capital cost of $1.3bn (includes a contingency of 25%) as a major
impediment to the projects development. Therefore, we support MNC’s endeavours to identify higher grade
zones of mineralisation at Los Calatos which may allow for an initial small-scale project potentially targeting a
couple of high grade starter pits. This could significantly reduce upfront capital costs. We note that the
majority (64%) of the upfront costs are related to the plant and tailings dam, with the remainder in
infrastructure of pre-strip (Figure 7).
Figure 7: Upfront Capital Costs
7
3 February 2015
Metminco Limited
Following the updated Mineral Resource estimate in March 2015, MNC plans to conduct an updated
Preliminary Economic Assessment for the project.
This will introduce additional optionality for the
development of Los Calatos.
EXPLORATION UPSIDE
MNC has identified four nearby shallow drill ready exploration targets which could supplement Los Calatos
ore. This could contribute materially, especially if a discovery is made at surface and is higher grade, to a
centralised processing facility located at the main Los Calatos deposit
The four drill-ready targets have been identified, within 2km of the known extent of the Los Calatos deposit.
While these targets all have smaller surface expressions to the 2.5km x 1km footprint of Los Calatos deposit,
the tenor of mineralisation and size potential at depth can only be tested by surface drilling.
An additional four areas were identified which require further exploration work (geochemical sampling,
geophysical surveys and geological mapping) in order to better define the extent of these targets prior to drill
testing. These areas are located further away (up to 7km) from the existing Los Calatos deposit but,
importantly, lie along the same northwest-southeast trending corridor which is known to control the main
elements comprising the porphyry complex at Los Calatos (Figure 8).
Figure 8: Project area comprises 275km2 of tenements and 8 defined exploration targets
8
3 February 2015
Metminco Limited
MOLLACAS COPPER LEACH PROJECT
The Mollacas Project, which occurs at an altitude of 1,500m above sea level, covers an area of 33km 2, and is
located in IV Region, Chile, approximately 65km east of the town of Ovalle and 160km by road from the port
of La Serena. The project is accessible via the existing road network and is in close proximity to established
infrastructure. MNC aims to exploit the deposit through mining and then agglomerating/stacking on a leach
pad with the pregnant liquor reporting to the SX-EW plant to be made into copper cathode (Figure 9).
However, at this time further work on the project has been delayed pending more clarity on mining access
rights.
Figure 9: Copper Leach Project - comprises an enriched copper oxide and supergene cap.
MINERAL RESOURCE ESTIMATE
In July 2012, MNC released an independent resource estimate comprising a total Mineral Resource of 34.3Mt
– inclusive of the oxide, secondary sulphide, transitional sulphide and primary sulphide ore types. Contained
within the total resource is 15.5Mt at a copper grade of 0.51% in the Measured and Indicated Mineral
Resource categories (contained metal of 79,111 tonnes of leachable copper), which relates to the oxide and
secondary sulphide zones and constitutes the basis of the Copper Leach Project (Figure 10).
Figure 10: Mollacas Mineral Resource Estimate (SRK July 2012).
9
3 February 2015
Metminco Limited
UPDATED SCOPING STUDY
In March 2014, MNC updated its previous scoping study (2008) on the Mollacas copper leach project and
incorporated the results of the pit optimisation study, updated mining and processing costs (contract mining),
as well as the new metallurgical test work. This test work showed a significant reduction (66%) in acid
consumption. The Company’s modelling suggests a 7 year mine life producing up to 8,000tpa of copper
cathode using a leach pad/SX-EW plant.. The capital cost estimate is low at US$47.1m and C1 Cash costs are
estimated at US$1.23/lb Cu, placing it in the lowest quartile of copper projects. MNC determined an NPV @
8% for the project of US$74.9m, based on a copper price of US$3.10/lb (Figure 11).
Figure 11: Copper Leach Project - comprises an enriched copper oxide and supergene cap.
10
3 February 2015
Metminco Limited
MINING ACCESS RIGHTS
MNC owns 20 Exploitation Concessions covering the Mollacas deposit and surrounding area, however, the
proposed open pit operation is located on private land. The Company is currently in dispute with the
landowner, Chilean company, Agrícola Bauzá Ltda, over access rights.
Since 2004 Agrícola Bauzá Ltda has filed various actions against MNC’s wholly owned subsidiary, Minera
Hampton Chile Limitada (“Hampton Chile”), and the previous owners of the Exploitation Concessions, with
respect to access and environmental matters, all of which have been vigorously defended. The Chilean
judiciary have ruled in favour of Hampton Chile and the previous owners of the Exploitation Concessions in
respect of all matters heard by the judiciary prior to March 2014.
In March 2014 MNC was advised that the Court of Appeal of the IV Region, Chile, (the “IV Region Court of
Appeal”) had ruled that the Company’s First Easement Extension (the “First Extension”) which would have
facilitated mine permitting was invalid on technical grounds. The First Extension was initially granted by the
Third Court of Ovalle on 11 November 2011.
The IV Region Court of Appeal did however confirm that the Original Easement permitting access to the
Company’s Mollacas Copper Project (viz. exploration and exploitation concessions), granted in 2004 by the
First Court of Ovalle, remains current and is in full force and effect.
MNC has since appealed the Court of appeals decision to the Chilean Constitutional Tribunal which has
declared the case admissible. MNC is seeking to overturn the March 2014 ruling over surface titles held by
the land holder which would enable the Company to engage in mining activities at Mollacas.
Based on legal advice received by MNC, the Company believes that the ruling by the IV Region Court of
Appeal is inconsistent with the current Mining Legislation of Chile, and that the ruling contained several
judicial flaws. A ruling from the Tribunal is expected in the short term.
11
3 February 2015
Metminco Limited
RISKS
Below, we outline a list of the risks for MNC.
additional risks which may not be listed here:
These are by no means definitive and there are always
Financing Risk: We believe the main risk for MNC is successfully financing its two development projects.
The Mollacas copper leach project in Chile will be the easiest to finance as it has significantly lower capital
requirements compared to the much larger Los Calatos copper porphyry project in Peru. It is unlikely that
MNC will be able to finance the Los Calatos project alone, and will hence either need to secure a strategic
partner, or to sell the project (or a part thereof) to an interested party. However, to attract prospective
buyers it is likely that a Preliminary Economic Assessment (as a minimum) would be necessary. MNC may
raise capital from time to time to continue as a going concern. The short term working capital agreement
with Berger has the potential to be dilutionary to shareholders as funding is done at a 5% discount to current
prices.
Permitting Risks: Permitting risks remain for both projects. At Mollacas, MNC is seeking to overturn the
March 2014 ruling over surface titles held by the land holder which would enable the Company to engage in
mining activities at Mollacas, was invalid. A ruling is expected in the short term.
Resource to Reserve Conversion: The Mollacas copper project has an estimated Mineral Resource of
15.5Mt, of which 72% is in the Measured Resource category and 28% in the Indicated Resource category.
The updated scoping study incorporated a mining inventory of 14.5Mt, implying a 94% conversion ratio. At
Los Calatos, 75% of the Mineral Resource is in the Measured and Indicated Mineral Resource categories. The
optimised mining scoping study (Optimised L3_Model) incorporated a mining inventory of 811Mt of the
estimated total Mineral Resource of 1.4Bt The risk exists that the conversion to a Mineral Reserve is lower
than that of the current mining inventories – which is more so the case for Los Calatos. An updated Mineral
Resource estimate is expected in March 2015.
Metallurgical Risk: Further metallurgical testwork will be needed at both Mollacas and Los Calatos. At Los
Calatos, only first phase metallurgical testing has been completed and further testwork will be required to
determine the optimal copper recoveries (87% used in the scoping study). Positively, at Mollacas
metallurgical testwork has confirmed significantly lower acid consumption compared to the previous work.
Further testwork is required to determine the lower limits of acid addition in the agglomeration phase, the
results of which will be included in the planned feasibility study due at the end of the year.
Commodity Price Risks: Assuming production from Mollacas, moving forward the majority of revenues will
be derived from the sale of copper cathode. Fluctuations in the copper price may affect the Company’s ability
to mine at a profitable margin. The price of copper also influences market sentiment to aspiring copper
project developers such as MNC, and this impacts valuations and market appetite.
Exchange Rate: As an Australian domiciled company with projects in South America, fluctuations in foreign
currency exchange rates between the Australian Dollar, Peruvian Nnuevo Ssol and Chilean Peso against the
US Dollar have the potential to decrease the profitability of the Company.
12
3 February 2015
Metminco Limited
DIRECTORS AND MANAGEMENT
Timothy (Tim) Read, Chairman (Appointed April 2010)
BA Economics, Fellow of the Chartered Institute for Securities and Investment
Mr Read has over forty years’ experience in the mining and metals sector, first as a mining analyst, then as an
investment banker and, most recently, as a corporate executive and director. Between 1995 and 1999, he
was Managing Director and Global Co-Head of Mining and Metals Investment Banking for Merrill Lynch Inc.
and, accordingly has extensive experience of all aspects of corporate finance, particularly M&A and equity
capital markets. Between 1999 and 2006, he was the chief executive of Adastra Minerals Inc. (acquired by
First Quantum Minerals in 2006) and since then has acted as a non-executive director for several natural
resource companies including Cumerio SA (acquired by Norddeutsche Affinerie in 2008), Kopane Diamond
Developments (until December 2009) and Faroe Petroleum plc. Tim is also the Senior Independent Director of
Capital Drilling Limited. In 2011, Tim was short-listed for the award of Non-Executive Director of the Year.
William Howe, Managing Director (Appointed July 2009)
B. Sc. Fellow of the AusIMM
Mr Howe was a Hampton Mining founder, has over 30 years’ experience in the mining industry and has
worked in southern and West Africa, Australia, South East Asia and North and South America. He has been
instrumental in the development of a number of new mining operations in Australia and South East Asia
including the development and management of the first copper heap leach operation in Australia. He
specialises in optimising existing operations in addition to the development of new operations, both in
underground and open pit environments, and has extensive experience in mine development, mine
management and corporate management. Mr Howe was a founding director of Straits Resources Limited and
was Managing Director of Ghana Gold Mines Limited, Hargraves Resources NL, Selwyn Mines Limited and
Hampton Mining Limited.
Steve Tainton, Executive Director (Appointed October 2013)
B. Sc. Geology (Hons)
Mr Tainton is a geologist by profession with over 30 years’ experience in the exploration and mining sector of
Africa, with a particular focus on South Africa and gold. Whilst he has spent most of his career in South Africa,
he has been involved with the evaluation of projects in some 27 different countries involving a variety of
commodities. Having started his career with Johannesburg Consolidated Investments Limited, he has held
various positions in management, from exploration to business development, which culminated in his holding
the position of Executive Director of the JSE listed company Western Areas Limited, prior to the sale thereof
to Gold Fields Limited. At Gold Fields, Mr Tainton held the position of Senior Consultant Strategy responsible
for Gold Fields’ SA Region, and more specifically their deep level gold mines, South Deep, Kloof, Driefontein
and Beatrix. Thereafter, he joined Partners in Performance, a Sydney based consultancy group, which focuses
on Business Improvement.
Dr Roger Higgins, Non-Executive Director (Appointed October 2013)
BE, MSc and PhD
Mr Higgins has over 40 years of mining industry experience, which has included environmental, strategy,
project development and operational roles. He commenced working in the industry as an engineering
hydrologist working on pit flooding and tailings disposal issues. Subsequent experience included responsibility
for projects and operations in arid Australia and the deserts of northern Chile, as well as in eastern and
western Canada. Mr Higgin’s earlier career included various hydrology related positions in Papua New Guinea
(Australian Government and Bougainville Copper), and 4-years at the University of New South Wales, where
he completed a PhD in water resource economics. He subsequently spent 26-years with BHP as Manager
Planning and Development BHP Copper, General Mine Manager Escondida, Managing Director Ok Tedi, Vice
President Project Development Chile and Vice President and Chief Operating Officer Australia, responsible for
the Olympic Dam and Cannington mines. Thereafter he spent 5 years with Teck Resources Limited as Senior
Vice President Copper in Vancouver BC where he was responsible for Teck’s copper business unit and its
related operations in Canada, Chile and Peru.
13
3 February 2015
Metminco Limited
Dr Phillip Wing, Non-Executive Director (Appointed 17 July 2009)
PhD, MEc, BEc, CPA
Mr Wing, is a founding investor in the Company and was the founding Chairman. Until July 2011, Mr Wing
held an executive position responsible for capital raising and investor relationships in Australia and Asia.
Mr Wing is also the Executive Chairman of a special purpose private equity firm. He is currently the Chairman
or Non-Executive Director of six investee companies ranging from mining to medical devices. Until January
2006, Mr Wing was a partner of Technology Venture Partners (TVP), a specialist Institutional Information
Technology and Telecommunications venture capital firm, for 7 years and was an active non-executive
director on many of TVP's portfolio companies in Australia and overseas. Prior to joining TVP, Mr Wing was a
senior executive in IBM's global and Asia Pacific management team. He held responsibility for a major industry
business unit in Asia and was also General Manager of the IBM (Australia and New Zealand) consulting
business. His last role at IBM was as General Manager (Global Services) responsible for strategy, marketing
and business development including acquisitions, alliances and business partners. Prior to his career at IBM,
Mr Wing was a partner at Ernst and Young, KPMG Peat Marwick and Touche Ross, specialising in strategy and
IT and corporate advisory consulting. Mr Wing held managing partner roles responsible for the consulting
business units and spent two years on secondment as the Chief Information Officer of NSW Health. Mr Wing
has worked extensively in the USA, Asia, and Europe. He has a Bachelor and Masters of Economics and has
completed a PhD in Organisational Behaviour.
He is a member of the Institute of Chartered Accountants, and has held recent positions as an adjunct
lecturer with the Centre for Applied Finance (Macquarie University) and an advisor to CSIRO to approve all
major research projects in Australia.
Francisco Vergara-Irarrazaval, Non-Executive Director (Appointed April 2010)
LLB
Mr Vergara-Irarrazaval has over 30 years’ experience in the mining industry in Chile and other Latin American
countries where he was Vice President of CompaÒ"a Minera El Indio and CompaÒ”a Minera San Jose,
subsidiaries of St. Joe Minerals Corporation until 1991. In 1991, he established Vergara & Cia, Law Firm,
providing legal services to different mining companies and international engineering firms focused in natural
resources, energy, shipping, salmon industry in Chile and agriculture. He has also acted on behalf of foreign
governments through their embassies in Chile, and has served as a Director of several listed companies, and
Chairman and Director of a number of unlisted companies.
Colin Sinclair, Executive General Manager
B. Sc. Geology (Hons); M. Sc.
Mr Sinclair has over 40 years’ experience in exploration and mine geology in Africa, Middle East, South
America and Australia, including 5 years in Chile (1992 to 1997) as a Managing Geologist. He has held senior
geological and managerial positions, including General Manager South America for North Limited, Project
Manager North Parkes Project for North Limited and Chief Geologist Ashanti Goldfields, Ghana. Colin is widely
experienced in base and precious metal geology, particularly in copper and gold. His experience covers major
deposits, various treatment processes and ranges from initial exploration through feasibility studies to
operating mines
Gavin John Daneel, General Manager Exploration
B. Sc. Geology (Hons); M. Sc.
Mr Daneel is a geologist by profession with over 25 years’ experience in the exploration and mining sectors
covering technical, management, commercial and corporate areas within the industry. His experience includes
open pit and underground mining within precious and base metals environments. Mr Daneel has worked in
Africa, Asia and South America and has been involved in exploration, mine and business development
management.
14
3 February 2015
Metminco Limited
Philip Killen, CFO/Company Secretary
B. Maths; B.Comm; CPA
Mr Killen is a finance professional with 20 years’ experience in the mining and exploration sector. Philip was
appointed in 2009 following the acquisition by Metminco of a 36.5% interest in Hampton Mining Limited. Prior
to joining Metminco his senior executive roles in the resources sector included Chief Financial
Officer/Company Secretary of Hampton Mining Limited, principal of CPK Consulting, Financial Controller of
Plutonic Resources Limited and Chief Financial Officer of Otter Gold Mines Limited. Previously he was with the
Caltex Group for over 10 years in various senior finance, commercial, audit and technology roles located in
Australia and overseas. His experience includes financial modelling to support bankable feasibility studies,
development of funding strategies, treasury, corporate governance and compliance, and implementation of
commercial systems.
Ross Corben, Mineral Resources Manager
BSc. (Geology); GradDipComp, Fellow of the AusIMM
Mr Corben has more than 25 years’ experience in the exploration and mining industry in numerous
commodities and countries. He worked as an exploration and mining geologist in Australia before spending 5
years working for the Surpac Minex Group in their UK and Canadian offices. He went on to join a number of
well-known Australian mining companies specialising in database management, resource estimation and
mining geology. He recently spent two years working on an advanced uranium project in Spain and prior to
that spent 6 years as the Technical Services Manager for Sino Gold in China. Mr Corben is a Fellow of the
AUSIMM with practical experience in JORC and NI43-101 reporting systems.
Stock recommendations: Investment ratings are a function of Patersons expectation of total return (forecast price appreciation plus
dividend yield) within the next 12 months. The investment ratings are Buy (expected total return of 10% or more), Hold (-10% to +10% total
return) and Sell (> 10% negative total return). In addition we have a Speculative Buy rating covering higher risk stocks that may not be of
investment grade due to low market capitalisation, high debt levels, or significant risks in the business model. Investment ratings are
determined at the time of initiation of coverage, or a change in target price. At other times the expected total return may fall outside of these
ranges because of price movements and/or volatility. Such interim deviations from specified ranges will be permitted but will become subject
to review by Research Management. This Document is not to be passed on to any third party without our prior written consent.
15
3 February 2015
Metminco Limited
16

Los Calatos: Targeting a smaller scale development option

Transcription

Similar documents

Santiago, Chile - Motion Metrics

DATE VENUE EVENT June 7 Marquee Theater TECH N9NE June 7

King Copper - Arizona-Sonora Desert Museum

Minerals - Saskatchewan Mining Association

NBI Complaint vs Tallado PDF 13 - Sagip

KEEP THE LIGHTS ON WITH THE COPPER LOCK DOOR.

After Party Flyer

March 15

Chile Update - Chinalco Yunnan Copper Resources