MARI thoughts - Capital raising & geochem anomaly Some thoughts from the same contact as before:
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It has been a busy few months for Marimaca Copper. So just a catch up on a couple of recent events:
Completion of equity capital raising
On December 3rd Marimaca announced the closing of a C$29m equity capital raising. This financing was led by Canaccord, and also included BMO, Paradigm, and Tamesis. The financing was upsized from the initial figure of C$20m, and the over-allotment provision was also exercised … both events showing strong demand.
Alongside raising new capital, the other aims of the financing were to gain wider market participation in Canada, increase the free float, and gain greater broker coverage. All of these aims were achieved … so combined with the strong demand, the management should be congratulated for a very successful transaction.
One short-term negative to point out – the equity raising (as is common in the Canadian mining market) did come with a warrant attached to the new shares. I think the warrant on the raising was very attractive … as such I believe we will see a small number of subscribers to the financing selling their new shares and riding the optionality value of their warrant. Therefore we will see a small overhang in the stock. But by its very nature this will be temporary … and dare I say even a buying opportunity.
Large new surface geochemical anomaly at the Mercedes target
This week Marimaca announced that they had identified a large new surface geochemical anomaly at the Mercedes target.
To take a step back – as previously discussed the vast amount of work to date (and perceived value) has centred around the Marimaca oxide cap. The PEA (released on August 4th) in my opinion confirmed this asset to be a standout globally in the mid-cap copper development space. At copper prices below where we are today the Marimaca oxide cap has a NPV8 of C$820m (equating to C$11.42 pre share on an unfunded basis), a post-tax IRR of 38%, and a 2.4 year payback. I know of no other development asset with such a strong return profile ... let alone one in a tier 1 jurisdiction and such a simple mine plan. The Marimaca oxide cap will continue to develop and crystallise value ... moving towards the completion of a Definitive Bankable Feasibility Study by the end of next year.
But this new announcement of a geochemical anomaly at Mercedes speaks to the wider picture that is just now coming into view. On September 23th the Company announced a regional high-resolution magnetic survey that confirmed their belief that the Marimaca deposit is just one of a large cluster of similar deposits.
On to the Mercedes geochemical anomaly - in short it is extremely encouraging. The target is 3km north of the Marimaca deposit. The copper anomaly measures 600m x 500m. In addition 50% of the Mercedes target is covered by post-mineralization gravels, and so the actual geochemical anomaly is potentially much larger. Sampled copper grades were as high as 0.60%. The anomaly is also coincident with a large magnetic anomaly as well as historical artisanal workings. Finally it’s important to mention that the geological anomaly is a strong analogue to the Marimaca oxide deposit ... with a similar size potential, and the same host rock, orientation and controls.
Ultimately, we will not know the true nature of Mercedes until the next drill program commences in Q1 2021. Mercedes is the first of four Marimaca lookalikes to be investigated. If the oxides of the Marimaca deposits equate to C$11.42 per share ... then what are 3 or 4 Marimacas worth ? An interesting question with the stock price at C$3.30. And we haven’t even touched on the sulphide potential.
In summary - I believe good progress is being made on all fronts. The capital raising has provided the capital required, and widened the Company’s market exposure. As said before I think we are in a privileged position: the defined Marimaca oxide deposit gives us a strong intrinsic value ... and in my opinion a value that is meaningfully higher than where the stock is priced now. On top of this we effectively get the exploration exposure for free. And it feels as if the exploration potential is becoming very very real.