Risk / opportunity valuation Deep south Res. Sedar:
04/29 financials (expressed in cad)
Current assets 5.2m
Fixed assets: 5.4m
capial: 10.1m
MC diluted 06/11 44m
P/B diluted: 0.23
Fixed assets MC diluted: 0.13
Note Peterhuber91: DSM was quiet for a long time due to the low copper price. Only now is a 'large' 12,000m drilling program started again.
Sedar PEA 02/01/2021 (exploration until 12/15/2020)
Measured: 0
Indicated: 57% to 0.31% CuEq / t
inferred: 43% to 0.29% CuEq / t (big growth trigger)
CAPEX: approx. 425m CAD
Open Pit: 1.41 stripp off
Processing: Bio-Heap Leach - Considerably high recovery and EIA risk
Note: The PEA is based only on the estimated indicated resource and the inferred resource are not part of this economic assessment. A drill program of 12,000 meters is recommended to infill a high grade section of the deposit. With a closer grid spacing, a high-grade part of the deposit could be included in the first years of mining to improve the economics and pay-back period.
Comment peterhuber91: The latest drill results showed drill intercepts: 156m at 0.46%, 152m at 0.47% cuEq / t. With these results, the probability of not only transferring resources from inferred to indicated increases, but also of significantly improving the grades. As already noted, this is an extremely rare phenomenon and would significantly improve economics.
Rating: at 'current' - usd 4.50 / lb CuEq copper prices
NPV7.5 (Project): approx.2.5b CAD
Discount 7.5% according to PEA and very insecure water supply (EIA, states)
IRR posttax ungeared project: approx. 47% MC undilutet / NPV7.5 = 0.0188
resources potential estimated by Peterhuber: 100% + Degree upgrade: quite possible
Closing words Peterhuber91
I have listed some valuation metrics to estimate the risk opportunity proportion. The accounting analysis is an essential part of activations, cash, equity and corporate issues but is completely unsuitable for a potential analysis for explorers / developers in the mining area. The much more important NPV shows very favourable economics with pricing in a 7,5% risk discount. (Country risk, water issue - river is running trough 3 countries, bip heapleach Risk). 10% is maybe more resonable.
DSM would still be feasible with a discount of 40% on the copper price (2.85 USD / lb CU) with an IRR of 29% posttax. That is the absolute argument for my investment. With a rating of approx. 0.02 MC / NPV7.5 at current Cu prices, DSM has potential for a Tenbagger ++. I rate the downside risk at current MC as mediocre. A standstill is not unlikely in the development path given the difficult approval situation. If the CU price remains above 3.50 usd and DSM expands the resource in the high grade area, I see the downside risk with the current MC as manageable. Risk/opportunity is therefore very good for me. Whether I go along with the whole development path or break off before the risky EIA, I will decide later, depending on the development and assessment. There are still many risks but at this crazy valuation the asset is undervalued at factor 2 to 3 in my oppionion at the current development stage.
disclosue: I am long at 0,205 cad
peter