Does China Moly DRC Deal Value Oroco at $18-19/Share USDSince it's apparently de rigueur to throw out hastily-researched back-of-the-envelope numbers out there, I thought I'd take a shot and share a $18-19/share USD price target on OCO calculated from China Moly's recent $550M USD deal to buy 95% of the undeveloped, but permitted, Kisanfu copper and cobalt project in the Democratic Republic of the Congo.
https://twitter.com/hchris999/status/1338306951638343682
1. Per pound cobalt prices are roughly 4.57x higher than per pound copper prices since cobalt is ~$16 USD per pound and copper is ~$3.50 USD per pound (16 / 3.5 = 4.57)
2. Kisanfu holds 6.28M tonnes of copper and 3.1M tonnes of cobalt. Since cobalt is 4.57x more valuable than copper, Kisanfu effectively holds 20.45M tonnes of copper (6.28 + 3.1 x 4.57 = 20.45).
3. The weighted average grade of the copper and cobalt at Kisanfu is ~1.55% based on an article I read here: https://www.portergeo.com.au/database/mineinfo.asp?mineid=mn1485
4. China Moly paid $550M USD for 95% x 20.45M x 1.55% = .30M tonnes of copper. This translates to $1,833 per tonne of copper.
5. According to the 2011 technical report, Santo Tomas held 822M tonnes of copper at 0.31% grade. Let's assume no expansion in this resource estimate or any other valuable residual minerals besides copper. 81% x $22M x 0.31% = 2.06M tonnes of copper. 2.06M tonnes x $1,833 per tonne = $3.776B USD.
6. $3.776B USD divided by 200M shares = $18-19 USD per share
Mexico has to be a more attractive mining jurisdiction than the DRC, but China Moly already had mining operations in the DRC. Perhaps their bid is a bit overstated because they have the appropriate development and production assets on the ground locally already?
Nevertheless, $18-19 is a heckuva lot higher than $1.50 USD.
I'm looking forward to learning why these back-of-the-envelope calculations are batsh!t crazy. Please enlighten me.