MARI - thoughts on further Cindy news … Good morning all. Some more commentary for the same source as before. B
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Hello,
On Wednesday (July 14th) Marimaca Copper announced follow-up exploration results from the Cindy Oxide Target. For the full news release
Click Here.
Summary of the results - the additional drill holes have extended the known length of the mineralised structure. The dimensions are now roughly c.800m x 130m. The grade of the Cindy Target so far is in the 0.22% to 0.39% range, but with 40-50m at a slightly higher grade (0.40% to 0.50% CuT) closer to the surface.
Thoughts :
- This news release is in effect a continuation of the previously announced Cindy exploration results from June 14th, and it confirms what we already believed we knew - The Cindy Target is not a repeat of the Marimaca oxide deposit (MOD), but it looks highly likely that it will add in additional tonnes to the overall mine plan. As previously discussed, this material is lower grade than the MOD, but meaningful portions of it will be above the modelled economic cut-off grade *
- How much more material could Cindy add to the future mine plan ? Yesterday the Canadian broker Canaccord modelled that Cindy would deliver 60mt of material above the economic cut-off grade, and that 30mt of this would probably fall in a greater mine plan. This feels about correct ... and 30mt against the current mineral resource of 113mt is significant. Again, is it lower grade, and probably won't change the sequencing of the mine, but it will undoubtedly add to the NPV of the project.
- On Wednesday the share price of MARI traded down post this news release, which I find surprising. I can only put this down to the marginal trader / investor having unrealistic built-in expectations for the ongoing exploration results. Obviously a discovery that repeated the scale of the MOD would be desirable, but in their own right these results are very positive. I see a danger in the short-term that the market could become overly focused on the exploration, and overlook what I believe it the strong intrinsic value of the defined economics around the MOD ($4.00 Cu price, post tax NPV8 of C$1.06bln, and an IRR of 46%. NAV of C$12.00 / share).
Summary - In essence this is a confirmation and continuation of the initial results we received from Cindy. The result looks like the Company will be adding a meaningful amount of additional ore into a wider mine plan. This will add to the project's value. The Mercedes Target has been drilled and I expect first results in the next 2 or 3 weeks, and drilling is now underway at the Robles Target. I feel the current valuation is attractive. But if the market moves lower from here, and momentarily loses sight of this existing and clearly defined value of the MOD, I believe the Company's valuation could become extremely attractive.
p.s. * The cut-off grade will obviously change with the copper price that is being used. For example in the PEA for the MOD, using @ $3.15 copper, the cut-off grade is 0.22% Cu/t. Using a $4.00 copper price this cut off grade falls to 0.17% Cu/t.
p.p.s. Note on the wider copper equities markets - the shares of many of the quoted copper producers are now 20/30% down from their recent peaks.It could well be the case that the stocks ran too hard, too fast. But this does seem strange while spot copper still sits at a very attractive price of $4.30, and the narrative behind global de-carbonisation through clear energy continues to build. It is worth keeping in mind that at these price levels the producers continue to generate very strong cash flows, and are deleveraging the balance sheets quickly. We haven't seen market commentary turn to 'growth' / acquisitions yet, but it feels that it is heading in that direction.