NCU >>> Summary of info for new buyers >>> Insider average share cost:
Pala / Iorich ~40 % 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
========================================================
Corporate presentations:
https://nevadacopper.com/site/assets/files/4190/ncu_october_2020_final.pdf
https://nevadacopper.com/site/assets/files/4209/2021-03-ncu-cp.pdf
Robert Pavich Video (last 10 minutes is best)
https://www.youtube.com/watch?v=hk_WhFu7FlA&feature=emb_logo
New video feature CEO Mike C.
https://www.youtube.com/watch?v=vIEmMHVZefA
Article:
https://provenandprobable.com/copper-corrects-from-an-all-time-high-nevada-copper-offers-value-and-a-bullish-trend/
Barrick CEO on copper as a strategic metal for the portfolio
https://www.bnnbloomberg.ca/investing/video/barrick-gold-ceo-says-copper-is-a-fantastic-strategic-asset~1907821
Long term copper supply / demand articles:
https://aheadoftheherd.com/copper-con/
https://www.kitco.com/commentaries/2021-05-19/Running-on-MT-peak-copper.html
https://www.mining.com/new-bull-chart-for-30000-copper-price-porphyries-nearly-mined-out/
Tim Crittenden, 5 star Tipranks analyst, new rating 50 cents in 2021
https://www.tipranks.com/stocks/tse:ncu/forecast
==================================================================
Summary of key NCU news releases:
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.
>>>A description of economic results with three 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 is obtained
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 sets of positive drill results
2016, June 9: (copper~$2.15) $4.8 million raised at $0.60.
>>>Total shares NCU shares outstanding = 88 million
2017, May 23: (copper~$2.55)
>>>Pala P.P. 10% premium to the 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;
>>>Total NCU shares outstanding = 660 million
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 is used)
2019, May 16: (copper~$2.70)
>>>$40 million combined private placement and public share sale $.040
2019, Dec 16: (copper~$2.80)
>>>Copper production commenced and ramp up to full 5000 tpd expected by mid 2020.
>>>65 m pounds p/ye projected from underground. Cost = $1.86 (all in sustaining cost)
2019, Dec 17: (copper~$2.80)
>>>Pala announces buying shares in the public market at $0.29 per share
>>>Pala’s total of the financing =273 million shares, ~ 36% of shares outstanding.
>>>New float is roughly 758 million shares
2020, April 6: (copper~$2.25)
>>>Covid necessitates a shutdown of the newly completed mill
>>>Underground work continues at a reduced pace
2020, July 31: (copper~$2.85)
>>>Equity sale completed. 667 million shares including the over-allotment
>>>This raises $100 million to pay down debt and cover expenses.
>>>New share price is about $0.14 after backing out about $0.02 per warrant attached.
2020, Aug 24: (copper~$2.95)
>>>Production is restarted
>>>Commissioning of hoist, vent shaft and underground crushing continues
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.
>>>Pala takes down an additional 80 million shares as a part of a debt to equity trade.
>>>New share total = 1.7 billion. Warrants will bring in about $100m
2021, March 18: (copper~$4.05);
>>>Some 5% ore is encountered in ‘development’ area on route to the new stopes
>>>Expect “grade increases” in combining weeks as stopes are accessed
>>>Hoist is tested to run at 5,000 TPD matching the tested mill capacity
>>>Electrical upgrades mostly completed (due to change in first stope to mine)
2021, April 21: (copper ~ $4.25):
>>>We are a few days away from the first stope to start extracting 2.2% copper
>>>Ventilation upgrades are progressing well
>>>Batch production is running very well at intermittent bursts of 4,700 tpd as development (and soon) new stope ore is being mined.
2021, May 17 (copper ~$4.70)
>>>Mike announces we will be at about 3,000 tpd by the end of q2 (June 30)
>>>Progress slowed a little as cautious progress is made through water bearing dike
>>>Covid has slowed the delivery of the Large surface fans so 5,000 tpd mid q4
2021, July 12 (copper ~ $4.30)
>>>Underground portion of ventilation is commissioned
>>>Pala extends additional loan financing
>>>The dike crossing work continues but grouting is still not complete
>>>The need for more development capital is announced due to higher than anticipated cost
2021, August 13 (copper ~$4.30)
>>>Lateral development has increased and more headings are opened up on a lower level. The lower level also requires a dike crossing
>>>3,000 tpd production is moved up to Q4 from Q3 and 5,000 tpd is moved to H1 2022 from Q4 2021
>>>Pala grants an additional $42 million in combined promissory note and loan credit.
>>>The company is in talks with it’s main lender KFW bank to extend debt into 2023 from 2021 and expects to be successful in obtaining the credit extension.
>>>Mike Brown becomes interim CEO to replace Mike C. (reasons are not disclosed)
=======================================================
Reasons to own NCU:
Nevada, USA. A stable jurisdiction vs Africa and South America
Future open pits have gold and silver credits not pre sold in any stream deal
Future open pits are already permitted to allow 70,000 tpd production
A possible 100,000 tpd open pit mine was recently proposed
Copper is beyond the $3.20 price assumptions in the NI-43-101
The mill throughput may be increased 6,500 tpd from 5,000 commercial production specification
Partial commercial copper production at 3,000 tpd in 4th quarter 2021
Full 5,000 tpd in H1 2022
Minimal hedges roll off soon
Covid uncertainty significantly decreased with vaccines programs
No insider selling for 10 yrs despite past issues
Banks lending at reasonable rates
Plenty of experienced labour available locally
A share consolidation of 10:1 announced and happening before year end
Expansion drilling will add decades more resources to the already large resources
Potential risks include:
Problems with the mine plan leading to more cost (example: the dike crossing)
Copper price dropping a lot
Mine accidents
Another Covid shut down
Cost to build the mine is about $10m to $13m per month and this needs to be financed which does add some more debt until production over 3000 tpd
========================================================
Some mining videos:
https://www.youtube.com/watch?v=D4yPsbkBg2M Cut & fill mining
https://www.youtube.com/watch?v=Oaxs7EEIp4k Room & pillar mining
https://www.youtube.com/watch?v=BdU6-DvnpVU Sub-level stoping
https://www.youtube.com/watch?v=ZmKwdtFkoxo Sub-level caving
https://www.youtube.com/watch?v=FDP2fRp7aKw Sub-level caving
https://www.youtube.com/watch?v=XtcXt-SOxus Cable bolting and grouting
https://www.youtube.com/watch?v=jNO4o0N--9s Underground mining methods
https://www.youtube.com/watch?v=nmAVtQ7MU4Y Barrik Gold mining methods
https://www.youtube.com/watch?v=1poHmdmix6Y&t=160s Sub-level stoping
https://www.youtube.com/watch?v=ga3AibEnawA Open stoping explained
https://www.youtube.com/watch?v=qUpnRHxoKc4 An underground mining operation
https://www.youtube.com/watch?v=uAXZDLpIVeQ Howden mine ventilation and planning
https://www.youtube.com/watch?v=gD-gc2agySA Underground mine ventilation
https://www.youtube.com/watch?v=vgQEj5Ah5p0 Mine ventilation tubing manufacture
========================================================
Recent specialist funds to BUY into NCU >>>
Fourth Sail:
-
70 million shares, 19 + million warrants (approximated from corp. pres.)
-
https://www.fourthsailcap.com/our-work/
-
We spend much of our time analyzing the underlying value of cash flows of companies, which is typically where we try to capture upside. Across sectors, we strive to have deep industry knowledge, continuous contact with management teams, and a constant refinement of our assumptions and models.Regal Funds
Regal Funds:
-
31 million shares, 8.5 million warrants (approximated from corp. pres.)
-
https://www.regalfm.com/site/About-Us/approach
-
INVESTMENT PHILOSOPHY
Through fundamental research Regal selects shares that it believes are undervalued and are expected to rise in price. In addition, the strategies utilise Regal’s expertise and systems to sell shares that it believes are overvalued and take advantage of a falling share price. This practice is known as ‘shorting’ and sets Regal apart from many other traditional investors as it creates more opportunity for alpha generation.
INVESTMENT PROCESS
The investment process for our funds focuses on a four-step stock selection process, which emphasises the bottom-up valuation of companies.
Underground alone, after ramp up ($4.70 copper:)
65 million pounds per year x $2.84 ($4.70 - $1.86 = $2.84)
Free cash-flow of about $184 million USD per year at a conservative, low 5 X cash-flow multiple = $923 million, divided by 1.8 billion shares = $0.51 USD = $0.62 CAD
OPEN PIT valued as not yet developed ($4.70 copper:)
IRR (7.5% discounted) of 44% (extrapolated from NCU's Oct 2020 presentation)
NPV of $2.35 b/ 1.8 b shares = $1.30 (then discounted 75% by me) = $0.33 USD = $0.40 CAD
Total share price:$0.62 + $0.40 = $1.02 CAD
==============================================
Underground mine after ramp up plus future open pit:
At $4.50 copper, 2.3 billion fully diluted shares and 70,000 TPD open pit:
70,000 tpd X .005 copper equivalent X 88% recovery X 2000 pounds per ton X 365 days per year = 225 million pounds plus 65 million pounds from underground = 290 million pounds X ~ $2.50 profit = $725,000,000 free cash-flow per year.
$0.725 billion p/year cash flow X5 multiple = $3.63 billion / 2.3 billion shares = $1.58 USD p/s
$0.725 billion p/year cash flow X6 multiple = $4.35 billion / 2.3 billion shares = $1.89 USD p/s
$0.725 billion p/year cash flow X7 multiple = $5.08 billion / 2.3 billion shares = $2.21 USD p/s
$0.725 billion p/year cash flow X8 multiple = $5.80 billion / 2.3 billion shares = $2.52 USD p/s
$0.725 billion p/year cash flow X9 multiple = $6.53 billion / 2.3 billion shares = $2.84 USD p/s
$0.725 billion p/year cash flow X10multiple =$7.25 billion / 2.3 billion shares = $3.15 USD p/s
$1.96 CAD to $3.91 CAD per share
=======================================================
An additional 83 million tons or more of ore may be available underground.
More drilling will be done to confirm the size and grade of this ore body and it may easily increase and is very economical at $4.00 copper price.
The current "measured and indicated" category is 54 million tons at 1.39% copper and the "Inferred" is 29 million tons at 1.09% copper. (these are in addition to the 13 years [24 million tons] of 1.6% that we are about to start mining.)
Taken together there is another approximately 60 million tons of about 1.2% copper in the measured / indicated category (also subject to more drilling expansion) to provide an additional 27 years of mill feed using 6000 tons per day.
The math is: 60 million ton / 6,000 tpd / 365 days a year = 27 years.
The grade is (about) 1.2% copper average
So, 6000 tpd X 365 days per year x .012 grade X .9 recovery X 2000 p per ton = 47 m pounds of copper per year for additional 27 years above the first 13 years.
At $4.70 copper ($2.84 p pound free cash-flow) X 47 m pounds = $133 m per year underground
Total additional = 27 more years of $133 m US per year, beyond the first 13 years of $184 million USD per year
======================================================
NCU timing is perfect for new investors
New mine build-out delays mean that copper sales from the relatively high grade new and underground mine will be hitting the market at what now appears to be decades long high copper prices.
In a few short weeks we will be at an initial 3,000 tons per day and, assuming the early ore is blended with lower grade development ore (essentially from tunnelling in) we will probably be running at 1.5% copper and then 1.8% soon after (higher grades are also possible.)
3,000 tons per day from underground will happen in q4 with 5,000 tons per day coming in 2022
So 3,000 tons X 2,000 pounds X 30 days per month X 1.5% copper X 90% recovery equals 2,400,000 pounds of copper per month by the end of Q4, 2021.
With the resumption of drilling (the programs ended a few years ago when cash dried up during both low copper prices and expensive bills for the underground and mill construction) the underground and open pit resources will increase in 2022.
=======================================================
2021 start up revenue pro-forma (underground only)
3rd quarter: July, Aug, Sept:
Blended grade of 1.5 % copper and 1,500 tpd = 1,215,000 pounds per month.
At $4.30 copper = $5,200,000 revenue per month.
4th quarter: Oct, Nov, Dec:
Grade 1.8 % copper and 3,000 tpd = 2,916,000 pounds per month copper
At $4,50 copper = $13,100,000 revenue per month.
===========================================================
Ivanhoe (IVN) KK mine versus Nevada Copper (NCU) on a future free cash flow comparison basis.
I use IVN KK mine as a comparison because it is low priced relative to future free cash-flow. Ivanhoe suffers a discount for being in the DRC. Both mines are 3 or 4 years until full production free cash flow.
IVN only owns 40% of KK and KK is about 85% of IVN’s total value that includes 3 more properties.
I am now using a larger $1.2 billion future cost to build the NCU open pit.
To this I add $500 million EV to arrive at $1.7 billion future EV for NCU versus $10 billion EV for IVN adjusted to the KK mine only.
| Based on copper production about 4 years from now | IVN KK40% owned DRC | | NCU 100% owned USA |
| IVN 500,000 tonnes (copper study group avg est.) Adjusted to 40%`owned | 440 million pounds | 220 million (prob more now since video) + 70 million underground | 290 million pounds |
| IVN av cost $1.15 all in cost | $3.45 C/F | NCU av cost $2.00 all in | $2.60 C/F |
| Long term avg annual free cash flow using $4.60 copper | $1.52 billion | | $750 million |
| IVN E/V adjusted to KK only | $10 billion | NCU EV adjusted to incl the open pit | $1.7 billion |
| IVN E/V divided by 2 to equalize free cash flow between IVN and NCU | $5 billion | NCU E/V is only 34% of IVN before discounting for DRC risk (see next line) | $1.7 billion |
| DRC 30 year risk adjustment is to say that the $5B E/V would be $6.5B if the KK mine were in the USA instead | $5.3 billion | NCU is currently trading at 26% the risk adjusted price of IVN | $1.7 billion |
| This means IVN is 4 times more expensive on future C/F basis | | | |
What this comparison tells me is that Investors in IVN are willing to pay times as much per share for future cash flow from the KK mine versus buying shares in NCU.
There is no doubt that estimated share value and cash flow is always decoupled from what buyers are actually willing to pay.
=================================================
Benefits of increases in the copper price to a higher cost operation (NCU) versus a lower cost operation (IVN KK mine)
| | Ivanhoe KK | Profit up since $2.50 copper | | Nevada Copper | Profit up since $2.50 copper |
| All in cost and % mine profit | $1.15 | | | $2.03 | |
| | ======= | ====== | | ====== | ===== |
| Cash-flow at $2.50 | $1.35 / 117 % | 0 % | | $0.43 / 21 % | 0 % |
| Cash-flow at $3.00 | $1.85 / 161 % | 37 % | | $0.97 / 48 % | 128 % |
| Cash-flow at $3.50 | $2.35 / 204 % | 74 % | | $1.43 / 70 % | 233 % |
| Cash-flow at $4.00 | $2.85 / 248 % | 112% | | $1.97 / 97% | 362 % |
| Cash-flow at $4.50 | $3.35 / 291% | 149% | | $2.43 / 120 % | 471 % |
| Cash-flow at $5.00 | $3.85 / 335 % | 186% | | $2.97 / 146 % | 595 % |
| | | | | | |
| | | | | | |
| | | | | | |
********************************************************************
https://www.fraserinstitute.org/file/annual-survey-of-mining-companies-2020-infographicjpg
Worth a read:
https://www.mining-journal.com/digital_assets/cef6461e-2984-41b3-8ce1-c11729429499/World-Risk-Report-2017-Executive-Summary.pdf
Cheers,
Notgnu
********************************************************************************************
| Based on copper production about 4 years from now | IVN KK40% owned DRC | | NCU 100% owned USA |
| IVN 500,000 tonnes (copper study group avg est.) Adjusted to 40%`owned | 440 million pounds | 220 million (prob more now since video) + 70 million underground | 290 million pounds |
| IVN av cost $1.15 all in cost | $3.45 C/F | NCU av cost $2.00 all in | $2.60 C/F |
| Long term avg annual free cash flow using $4.60 copper | $1.52 billion | | $750 million |
| IVN E/V adjusted to KK only | $8.5 billion | NCU EV adjusted to incl the open pit | $1.8 billion |
| IVN E/V divided by 2 to equalize free cash flow between IVN and NCU | $4.25 billion | NCU E/V is only 42% of IVN before discounting for DRC risk (see next line) | $1.8 billion |
| DRC 30 year risk adjustment is to say that the $4.25 b E/V would be $5.3 b if the KK mine were in the USA instead | $5.3 billion | NCU is currently trading at 33.9% the risk adjusted price of IVN | $1.8 billion |
| To me this means IVN KK is 3 times more expensive on future C/F basis than NCU | | | |
========================================================
This table compares Ivanhoe KK mine at an $8.5 billion valuation (85% of IVN EV) with NCU at an $1.8 billion valuation
The NCU valuation is the addition of $600 million for the existinting EV plus $1.2 billion to finance and build the 70,000 tpd open pit.
The copper per year production figures represent production in or around 2024 to 2025 for both mines.
These number are presented as though there is zero risk discount applied to the IVN KK mine and applying a 20% or 30% discount would add yet more relative valuation to NCU at all cash flow multiples and all copper prices from $3.00 and up
At $2.00 copper NCU is bankrupt in this model and IVN KK is still okay.
| Free cash flow at: | $2.00 | $3.00 | $4.00 | $5.00 | $6.00 | $7.00 |
| IVN KK mine
$1.15 all in cost, 480 m pounds per year (according to TA1) | $408m | $888m | $1.37b | $1.85b | $2.3b | $2.8b |
| | | | | | | |
| NCU underground plus open pit
$2.00 all in cost cost, 290 m pounds per year | $0.00 | $290m | $580m | $870m | $1.16b | $1.45b |
| | | | | | | |
| Free cash flow at $7.00 copper, divided by EV | 10 X | Divide by EV | 15 X | Divide by EV | 20 X | Divide by EV |
| IVN KK | $28.0b | $3.29 | $42.0b | $4.94 | $56.0b | $6.59 |
| NCU | $14.5b | $8.05 | $22.7b | $12.61 | $29.0b | $16.11 |
| Free cash flow at $5.00 copper, divided by EV | 10 X | Divide by EV | 15 X | Divide by EV | 20 X | Divide by EV |
| IVN KK | $18.5b | $2.17 | $27.8b | $3.27 | $37.0b | $4.35 |
| NCU | $8.7b | $4.83 | $13.1b | $7.27 | $17.4b | $9.67 |
| Free cash flow at $3.00 copper, divided by EV | 10 X | Divide by EV | 15 X | Divide by EV | 20 X | Divide by EV |
| IVN KK | $8.9b | $1.05 | $13.4b | $1.58 | $17.8b | $2.09 |
| NCU | $2.9b | $1.61 | $4.4b | $2.44 | $5.8b | $3.22 |
| Free cash flow at $2.00 copper, divided by EV | 10 X | Divide by EV | 15 X | Divide by EV | 20 X | Divide by EV |
| IVN KK | $4.8b | $0.56 | $7.2b | $0.84 | $9.6b | $1.12 |
| NCU | $0 | $0 | $0 | $0 | $0 | $0 |
===========================================================
NCU compared to IVN on an E/V basis:
Current IVN to NCU >>> Enterprise value Ratio >>>
At present you would need to own over 23 entire USA NCU mines to equal Ivanhoe's DRC properties
NCU E/V = under $500 million
IVN E/V = about $11,500 million
23 X $500 million = $115000 million
==============================================
Cheers,
Notgnu