Nevada Copper Corp NEVDQ

Or for realz are these calculations on NCU

[Notgnu]

Copper over $4.10

Revised numbers for Feb 23 / 21

Based on a 5X cash-flow, $4.10 copper and extrapolating from the December corporate presentation which itself is based on the NI 43-101

Open PIt

• IRR of 39%

• NPV of $1.88 billion / 1.8 billion shares = $1.04 per share and then discounted by 75% =  $0.26USD

 

Underground mine (after full ramp up)

• 65 million pounds per year x $2.24 ($4.10 - $1.86 = $2.24)

• Free cash-flow of about $146 million per year at a 5X cash-flow multiple = $730 million, divided by 1.8 billion shares = $0.41 USD

 

Total share price:

• $0.41 USD + $0.26 USD = $0.67 USD = $0.84 CAD  

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Copper over $3.90. 

Revised numbers Feb 18 / 21

Based on $3.90 copper and extrapolating from the December corporate presentation (itself based on the NI 43-101) 

Open PIt

• IRR of 39%

• NPV of $1.65 billion = $0.97 (discount by 75%) =  $0.24USD

 

Underground mine (after full ramp up)

• 65 million pounds per year x $2.04 ($3.90 - $1.86 = $2.04)

• Free cash-flow of about $132 million per year at a 4X cash-flow multiple = $530 million, divided by 1.8 billion shares = $0.31 USD

 

Total share price:

• $0.31 USD + $0.24 USD = $0.55 USD = $0.70 CAD  

 

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The case for NCU with current copper prices vs other copper miners:

NCU cost to produce is $1.90 to $2.10 per pound depending... let's call it $2.00

Other copper mines cost $0.50 to $1.50 let's say... so let's call it $1.00 per pound (net of by-products usually)

At $2.50 copper:

• NCU    =  $0.50 profit

• Other's = $1.50 profit (or 3 X NCU)

At $3.00 copper:

• NCU    =  $1.00 profit

• Other's = $2.00 profit (or 2 X NCU)

At $3.50 copper:

• NCU   =   $1.50 profit

• Other's = $2.50 profit (or 1. 66 X NCU)

At $4.00 copper:

• NCU   =   $2.00 profit

• Other's = $3.00 profit (or 1.5 X NCU)

At $4.50 copper:

• NCU    =  $2.50 profit

• Other's = $3.50 profit (or 1.4 X NCU)

 

Why does NCU benefit more? Answer (in above example):

• Other's went from $1.50 to $3.50 profit = 133 % increase

• NCU   went  from  $0.50 to $2.50 profit = 500 % increase

 

In this example NCU benefits 5 X more than the other's

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The Lemonade Stand analogy for NCU leverage:

When you have a lemonade stand selling the sweetest lemon nectars for 50 cents a cup (x 1000 cups a day) and the stand across the road also selling at a competitive price and same volume, you say okay am I making more money or is my neighbour making more money? To your horror you find out that your cost is 45 cents (all in) for every cup worth but your damn arch rival gets almost free supply and has a cost of only 25 cents. At 1000 cups a day your lemonade stand is worth almost nothing (5 cents profit x 1000) cups x 60 day season = $3000 x 5 times cash flow = $15,000 enterprise value) 

The value of your stand is $15,000 but your neighbour's stand could sell to outside shareholders for $75,000 (because 25 cents profit is 5X as much as 5 cents profit)

Suddenly it gets really, really hot out and the market also heats up. The price of lemonade goes to $1.50 Your lemonade stand now makes $1.05 per cup and your neighbour makes $1.25 per cup. 

Your neighbour's value goes to $375,000 (1000 cups at $1.25 profit X 60 days X5 multiple) and the value of your stand (shares of) goes to (1000 cups at $1.05 profit X 60 days X5 multiple) to $315,000.

So, although your neighbour's stand is worth more currently, your enterprise goes up in value from $15,000 to $315,000 or 2000% with the new lemonade price environment whereas your neighbour's stand goes up from $75,000 to $350,000 or 366% (assuming a long term ability to get $$1.50 per cup of course.)

So the leverage to the increase in the price of lemonade is multiples higher and the leverage to a decrease in price is also much higher. If lemonade were to drop to 40 cents a cup your neighbour stays in business, does okay and lives to see another season whereas you go bankrupt or have to refinance at hugely dilutive terms.

NCU not only benefits hugely this way but also has the ability to drill out more of their 15000 acres and add greatly to the proven and probable resources along the way and yet is still priced assuming about 55 cents a cup of lemonade. The difference is that it is copper and not lemonade so it is far more difficult for new sellers to come in and flood the market.

Thus NCU = huge and under appreciated upside in a long term copper bullish (super-cycle) environment and because of this I see a potential sale at $.75 to $1.25 a share, and if not then I still stick to my previous share price of $0.45 to $0.60 by mid to end of 2021.

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Guesses about the rate of start up production (underground only)

• Assuming that 2% high grade ore, blended with development ore at 90% recovery that works out to 1% copper per ton this = 40,000 pounds of copper per day (20 x 2000) which = 1.2 million pounds of copper per month.

• About 715,000 pounds of that is hedged at $2.91 per pound so that gives $1.05 per pound profit after deducting $1.86 cost which = $750,750 per month

• So $751,000 plus the remaining 485,000 pounds X $2.24 per pound ($4.10 - $1.86 cost) = another $1,086,000 per month for a total of $1.84 million per month profit.

• Increase the mixed grade to 1.3% copper (after blending and recoveries) with a ramp up to 3000 tons per day = hedged portion of $751,000 plus another 1.625 million pounds X 2.24 = $7,056,000 million for a total of $4.4 million per month profit.

• Increase the mixed grade of 1.5% copper at 3500 tons per day and get 3,150,000 pounds per month. $751,000 (hedged portion) plus 2,435,000 pounds (not hedged) x $2.04 profit = $7,078,000 + $750,750 = $7.8 million per month profit.

• Increase the recovery grade to 1.8%copper at full 5000 tpd (once the hedge is gone) and get 5,400,000 pounds of copper per month and get $12.1 million per month profit.

• Multiply the 5.4 million pounds copper by 12 months and get back to NCU's prediction of about 65,000,000 pounds per year copper.

• Using a $4.10 copper price minus the $1.86 cost and get 65,000,000 pounds X $2.24 profit = $146 million yearly cash-flow (underground only.)

$146 million per year at a 5X multiple = $730 million, divided by 1.8 billion shares = $.41 per share PLUS the open pit asset which is easily worth $.23 per share today.

Near term price $0.64 per share USD which is $0.80 CAD with a lot more upside from there.

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 Some reasons I own NCU shares: 

• The future open pits are now highly economic and are relatively high grade

• First in 10 yrs new USA copper producer

• Future open pits have some gold and silver (not sold in any stream deal)

• The future open pits are already permitted and may be spec'd at 70,000 tpd

• Copper demand running beyond the price assumptions in the feasibility study

• The new mill is successfully ramping up to it's 5000 tpd capacity (prob 50% now)

• Trading at 0.75 X book value

• Full copper production next 6 to 10 weeks

• Hedged only about 25% over next 11 months

• Covid uncertainty is reduced with vaccine roll outs

• No insider selling for 10 yrs despite past issues

• Banks lending now at reasonable rates (interbank rate + 4.9%)

• Highly experienced CEO with 3,500,000 share rights which align him with us. 

• A mining friendly jurisdiction with plenty of experience labour available

• Future full US listing anticipated later this year, with simultaneous share consolidation which will allow margin and institutional buying

Potential risks include:

• Problems with the mine plan leading to more cost

• Copper price dropping a lot

• Mine accidents

• Another Covid shut down 

Interpretation of the 2020 share price collapse:

Covid hit and the mine was shut down. It was bad timing in terms of funds to get production up and running. Cash was not there and it looked like another dilution was to happen

 

Selling came in with very little buying support. Then the situation changed for the better yet investors were scared.

Insider average costs:

 

Pala / Iorich    60% owner            > $0.51 (calculated as of January financing)

NCU director Nutter                     > $0.32 (calculated as of Dec 2020)

NCU director Albanese                > $ 0.41 

NCU director Brown                     > $0.31

NCU chairman Gill                       > $0.21

NCU senior VP Joseph                > $.32

NCU director Cochrane               > $0.67

 

NCU: The underground portion of the new mine. Some history.

• Throughout 2019 copper prices declined about $0.75 per pound.from around $3.00 to about $2.25 (March of 2020) This was the first major hit to the share price because the NI 43-101 assumed an average price of $3.00.

 

• Quote: "Consensus prices per the 2019 NI 43-101 Tech Report : US$2.83 – 3.20/lb Cu"

 

• Covid shut the mine down just as it was about to start up production in March. Copper was about $2.25 at the time and NCU dropped to $0.24

 

• The share price continued to decline and only in June did it have a small pop back to the $0.20 area... presumably because copper increased to the $2.75 area, thus making the mine very viable again (all in cost of $1.89 underground, leaving $0.86 per pound net profit.)

 

• More cash was needed to get to positive cash-flow and support debt obligations (thus the now infamous dilution / refinancing at a about $0.14) 

• Shareholders bailed on mass with the tax loss season impending and with covid doom and gloom in the air, leaving the share price to hit it's 2020 lows.

 

• Since then both copper and the outlook and the price for copper have improved greatly and this affects everything. NCU is affected more than most because going from almost bankrupt, to having a very profitable outlook, creates a much bigger leverage effect than going from merely profitable to more profitable (as is the case with other low hedged copper mines)

 

• Since the life saving July financing NCU's marginal profit is over 70% greater now (see calculations below.)

 

• During the time copper prices went up the mine build progressed amazingly well. The mill was tested to run great at 'nameplate" of 5000 TPD and the underground hoisting and ore crushing have successfully been commissioned... a shout out to the new CEO and the NCU team.

 

• NCU's hedging is relatively small and applies to only the first 6 months of 2021 leaving the vast majority of the copper open to the new higher copper prices.

• The recent financing converted another big piece of debt to equity so the balance sheet is in great shape.

 

• Despite the troubles in the past there has been no insider selling for 10 years and insiders hold a lot of stock cumulatively, with Pala / Iorich holding about 60% at an average price that is greater than $0.51.

 

• There also exists a little mentioned but large upside in the underground resource. It consists of an additional 72 million tons of 1.2% copper that is way down in the indicated and inferred categories which would be good for an additional 39 years (above the first 5 years) of underground mining at 5000 tons per day.

• Drilling can now be effected from underground at a lower cost than surface down drilling (as I understand it.) This means the resource can be greatly expanded. Extrapolating from the NI 43-101 as presented in the Corporate Presentation I get an underground cost of about $45 per ton. At current copper prices that 1.2% ore is worth about $90 per ton, which gives about $45 a ton of gross profit = 100% gross profit. This resource, and possibly the grade, may also increase as more definition drilling is accomplished in the underground.

 

• https://nevadacopper.com/site/assets/files/4190/ncu_october_2020_final.pdf

 

Robert Pavich Video (last 10 minutes)

https://www.youtube.com/watch?v=hk_WhFu7FlA&feature=emb_logo

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Summary of NCU news since 2013

This is my summary of key news releases stipped down to track shares issued, share prices at each issuance, total shares out at the time, and the copper price at each news release date.

 

I hope it helps to give an overview.

 

I will later add it to my overall investment thesis as posted previously and repost it for new NCU buyers

 

2013, Sept 9: (copper~$3.30) Final permit for underground mine build, plus loan financing.

2013, Nov 14: (copper~$3.20) Stand alone open pit feasibility study filed using $2.75 copper

2014, Dec 15: (copper~$2.75) Land bill passed by Senate and House of Reps

2015, May 28: (copper~$2.45) Feasibility results. Mine life increased by 5 years. Description of economic results using 3 base case scenarios for copper.

2015, June 1 - July 15: (copper~$2.25) Three more positive drill result releases, including 400’ of 1% copper.

2015, Aug 17: (copper~$2.25) Full permit for open pit

2015, Aug 21: (copper~$2.25) BLM conveys 10,000 acres of land to NCU.

2015, Sept 10 & Nov 3: (copper~$2.20) Two more positive drill result sets

2016, June 9: (copper~$2.15) $4.8 million raised at $0.60. Total shares = 88 million

2017, May 23: (copper~$2.55) Private placement with Pala at 10% premium to market = $0.66 for 3.7 million shares. Total NCU shares outstanding = 93 million 

2017, Dec 17 and 2018, Jan 12: (copper~$3.20) Construction financing and debt restructuring

2018, Feb 26: (copper~$3.20) Restart of underground mine construction after the raising of more funds.

2018, March 5: (copper~$3.10) $128 million from Pala for an additional 256 million shares. $0.50 each

2018, May 15: (copper~$3.05) Open pit extension drill results including 42 metres of 2% copper

2018, July 17: (copper~$2.75) Additional equity financing. $108 million, $0.60 per share; new total 660 million shares

2018, Sept 6: (copper~$2.60) $70 million received in exchange for (underground only) Au & Ag metal stream.

2018, Sept 10: (copper~$2.65) PEA received for the open pit using $3.20 long term copper. 

2018, Nov 13: (copper~$2.75) Announcement to update technical report to include new info and PEA

2019, Feb 22: (copper~$2.75) Announcement of 5,700 additional acres staked for exploration, thereby expanding the Pumpkin Hollow property by 32%

2019, April 16: (copper~$2.90) New open pit PFS study published with updated numbers ($3.20 long term copper price used)

2019, May 16: (copper~$2.70) $40 million combined private placement and public equity share sale $.040 per share.

2019, Dec 16: (copper~$2.80) Copper production commenced with expected approx 6 months to ramp up to full 5000 tpd. 65 million pounds of copper per year projected from underground at cost of $1.86 per pound AISC (all in sustaining cost)

2019, Dec 17: (copper~$2.80) Pala announces buying shares in the public market at $0.29 per share and holding an aggregate total of about 273 million shares representing about 36% of all the shares outstanding (so roughly 758 million shares outstanding.)

2020, April 6: (copper~$2.25) Covid necessitates a shutdown of mill production though underground work continues at a reduced pace.

2020, July 31: (copper~$2.85) Equity sale completed of 667 million shares, including the over-allotment that raises $100 million to pay down debt and cover ongoing expenses. The price per share works out to about $0.14 per share after backing out about $0.01 per half warrant attached.

2020, Aug 24: (copper~$2.95) Production is restarted and commissioning of hoist shaft, vent shaft and underground crushing continues to move forward very well.

2020, Oct 15: (copper~$3.05) Mike Ciricillo is brought on board as CEO. Mike “...was previously the Head of Copper Industrial Operations for Glencore Plc, where he oversaw Glencore’s worldwide copper assets…”

2021, Jan 29: (copper~$3.55) Equity financing; 230 million shares issued at $0.16 for proceeds of $38 million and Pala takes down an additional 80 million shares as a part of a debt to equity trade. The share base is now about 1.7 billion and a lot of warrants will bring cash in at an average of $0.21 once the share price tracks significantly above that price. 

 

2021, Feb 8: Writing this document (copper~$3.68)

Copper close to a 9 year high

Nice to be just at the very early stage of extracting the high grade underground ore while copper continues up. 

A majority of the investment in proving up and building this mine came from shares issued at much higher prices and while the copper outlook was anemic and copper was trading below $3.00.

Now is the right time to accumulate. Earnings will, of course still be negative for a year but cash-flow cometh soon and with copper over $3.50 the longer term profit will be immense and will pay this asset off very quickly, including the cost of building the (permitted) open pit portion.

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March 01, 2021 - 04:38 PM

196 Reads

Post# 32688076

If you believe in NCU long run then >>>

...and I am all in now, then take a look at the NCU A warrants at $0.05 now. I bought a stack and would buy more.

 

If you believe that within the remaining 17 months NCU gets to:

$0.40 then $0.22 plus $0.05 = $0.40 minus $0.27 = $0.13  (260% up / shrs 220%)

$0.50 then $0.22 plus $0.05 = $0.50 minus $0.27 = $0.23  (460% up / shrs 277%)

$0.60 then $0.22 plus $0.05 = $0.60 minus $0.27 = $0.33  (660% up / shrs 333%)

$0.70 then $0.22 plus $0.05 = $0.70 minus $0.27 = $0.43  (860% up / shrs 388%)

$0.80 then $0.22 plus $0.05 = $0.80 minus $0.27 = $0.53 (1060% up / shrs 444%)

$0.90 then $0.22 plus $0.05 = $0.90 minus $0.27 = $0.63 (1260% up / shrs 500%)

 

All will be well,

Cheers,

Notgnu

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March 02, 2021 - 01:48 PM

68 Reads

Post# 32696345

Barrick CEO on copper as strategic >>> NCU is permitted!

https://www.bnnbloomberg.ca/investing/video/barrick-gold-ceo-says-copper-is-a-fantastic-strategic-asset~1907821

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Notgnu (598)

User Actions  

March 01, 2021 - 02:20 PM

103 Reads

Post# 32686924

Gnu's Release on today's News Release >>>

All is well... They are just confirming that the higher copper prices = good times ahead IMO.

 

Using $4.00 copper, 2.2 billion shares (for fun), and a few multiples below:

 

Open pit straight to 70,000 TPD

 

Plus an underground mine expansion:  "...future opportunities to leverage the original shaft design capacity and potential expandability of mill throughput with the aim to expand long-term production rates..."  (not accounted for below.)

 

Open pit: 70,000 tpd X .005 copper equiv. X 2000 pounds per ton X 365 days per year = 250 million pounds + another 65 million pounds from underground =

 

315 million pounds X about $2.00 profit (at $4.00 copper)

 

$630 million p/year cash flow X5 multiple = $3.15 billion / 2.2 billion shares = $1.43 USD p/s

$630 million p/year cash flow X6 multiple = $3.78 billion / 2.2 billion shares = $1.72 USD p/s

$630 million p/year cash flow X7 multiple = $4.41 billion / 2.2 billion shares = $2.00 USD p/s

$630 million p/year cash flow X8 multiple = $5.04 billion / 2.2 billion shares = $2.29 USD p/s

$630 million p/year cash flow X9 multiple = $5.67 billion / 2.2 billion shares = $2.58 USD p/s

$630 million p/year cash flow X10multiple = $6.3  billion / 2.2 billion shares = $2.86 USD p/s

 

Converted to Canadian = $1.81 to $3.62 depending on the multiple applied.

Remember... this is with using 2.2 billion shares and $4.00 copper and all costs in

This is worth the long game and worth fighting for :-))

Cheers,
Notgnu