If you look back at Lumina in a weak copper market, it appears that all of their projects did quite well returning money to SHs, including Taca Taca. I would think the value is above $0.75, and I am willing to wait. It's the poor man's silver.
TORONTO (ResourceInvestor.com) -- Lumina Copper [TSX: LCC] is taking advantage of the strong copper market with plans to split itself into four separately traded companies.
Founded by Ross Beaty, Chairman and former CEO of Pan American Silver Corp. [TSX: PAA; NSDQ: PAAS], the company acquired a total of 10 properties from 2002 to early 2004 when copper traded well below US$1 a pound, and with a bet that their option value would multiply several times.
Prices for the red metal have steadily moved higher since then on the back of low inventories and strong demand from China. Copper now trades for around US$1.50 a pound in New York.
Taking advantage of the high prices, Lumina announced a strategic plan at the beginning of February to split the company into four separate entities.
Lumina's diversified portfolio of projects had given the company a lower risk profile compared to most other junior explorers. However, the spin-off should unlock value by giving its various assets the chance of trading at higher multiples to net asset values.
Investors are apparently pleased with the plan - the stock climbed from $5.25 in mid January to a 52-week closing high of $9.60 on March 21. It has since pulled back to the $8 level.
Regalito Copper will contain Lumina's prize asset - the fully owned Regalito deposit in central Chile.
Lumina started work on the property in December 2003, completing 32,189 meters of drilling over 114 holes. This has delineated a measured and indicated resource of 628 million tonnes grading 0.43 per cent copper, and inferred resources of 131 million tonnes grading 0.41 per cent copper using at a cut-off grade of 0.25 per cent. That equates to a measured, indicated and inferred resource of 7.1 billion pounds of copper.
The project is envisioned as producing copper cathode on-site, avoiding the lower profit margins associated with shipping copper concentrate to an off-site smelter.
A preliminary assessment to evaluate the viability of a mining operation producing 150,000 tonnes per year of copper cathode is targeted for completion during the second quarter of 2005. An independent engineering firm has already completed a preliminary infrastructure study for the layout of heap leach pads, dumps and basic infrastructure to support such a mining operation. The surrounding region's infrastructure is well developed, hosting numerous mining operations.
In a report dated April 13, 2005, Matthew O'Keefe at Westwind Partners stated he believes a number of majors will start bidding for the project sometime this year. He feels companies already with established mining operations in the country will desire the project, noting the corporate tax rate in Chile is 17 per cent whereas foreign corporations that repatriate profits are penalized at a rate of up to 35 per cent.
Galeno, Lumina's second most valuable asset, along with the Pashpap property, will be put into Northern Peru Copper Corp. As the name implies, both properties are in Peru, approximately 500 kilometres north of Lima, the capital.
The 486 million tonne copper-gold porphyry Galeno project is located 16 kilometres from Newmont Mining's [NYSE: NEM] Yanacocha gold mine. This year's $5 million program aims to expand the resource and updated it to NI 43-101 standards. Westwind's O'Keefe expects the deposit to be ready for sale in 2006. No work is currently planned on Pashpap.
The three Canadian assets - Hushamu, Redstone and Casino - will reside in Lumina Resources Corp.
The Hushamu property is located on northern Vancouver Island about 25 km west of Port Hardy, British Columbia. The deposit is situated about 29 km from the BHP Island Copper Mine that produced 345 million tonnes of ore between 1971 and 1994 with average head grades of 0.41 per cent copper, 0.017 per cent molybdenum, 0.19 grams per tonne gold and 1.4 grams per tonne silver. Up to 20,000 metres of drilling is planned in 2005.
The Redstone copper deposit is located 290 kilometers south of Norman, Northwest Territories. The Casino copper-gold-molybdenum deposit is located 300 km northwest of Whitehorse in the west central Yukon Territory.
The remaining early-stage properties, two in each of Chile (Relincho and Vizcachitas) and Argentina (Taca Taca and San Jorge) will be placed in Global Copper Corp.
Management anticipates the split will be completed by the end of May 2005, with listing applications will be sought for each company on recognized stock exchanges. The plan of arrangement contemplates that shareholders will be entitled to one new share of each of the three new companies, in addition to their shareholding in Lumina.
Westwind's O'Keefe rates Lumina a 'buy.' Until the spinout is successfully completed, he calculates a $13.25 target based on a 30 per cent holding company discount to net asset value.