Valuation Cuu vs. CumSince I own 12,000 + shares of CUU I've been doing my DD.
Copper Mountain's Share price just broke $4 on Friday with a Market Cap of $369 million. 90m shares
As we all know CUU closed at 88 cents with a Market Cap of $310 million. 350m shares
If you put CUM's feasibility and CUU's pre-feasibility studies on a level playing field:
1. CUM would have annual copper production of 96 million pounds or revenue of $336 million at $3.5 copper. Gold production of 27k ounces and silver production of 295k ounces add another $25 million and $3 million at current revenue.
So thats total revenue of about $350 million. The feasibility identified expenses of $90 million so pre-tax profit of $250 million / year on a 16 year mine life.
2. CUU would have annual copper production of 211 million pounds or revenue of $738 million at $3.5 copper. Gold production of 199k ounces and silver production of 1439k ounces add another $200 million and $18 million at current revenue. In addition, CUU has Moly and a $17 production of 11 million pounds is worth another $200 million in revenue.
So thats total revenue of about $1150 million. The feasibility identified expenses of about $500 million so pre-tax profit of $650 million / year on a 22 year mine life.
Some big differences between these projects:
A) CUU won't be online until 2014/2015....whereas CUM is coming online in the spring of 2011.
B) CUU will only retain 25% ownership while CUm will have 75% ownership.
75% of CUM's cash flow = 250m * 75% = $187m
187m / 90m shares = Cash flow of almost $2 / share implying a PE of 2 for the current stock price. Should be an easy $6-$8 share price or higher if they can extend mine life and do more drilling with their cash flow. Return = 50% to 100% in 18 months.
Now, for CUU, 25% of Cash flow = $650m * 25% = $162m or Cash flow of ~50 cents/share. Current PE is 1.76 (88 cents / 50cents). Given the fact the mine is still 5 years away it seems crazy that its PE (1.76) is almost the same as CUMs (2). So either CUU is overvalued or CUM is undervalued. Personally, I fear its a combination of both. Copper mountain Here I come.
Appreciate your thoughts on the above.