RE:RE:RE:IKN comments on Marimaca Copper Corporation RBC Report
Outperform
Speculative Risk
TSX: MARI; CAD 3.46
Price Target CAD 5.50 ↑ 5.00
October 13, 2022
Marimaca Copper Corp.
Growth spurt
Our view: Marimaca remains one of our favorite copper development
stories and the updated mineral resource estimate ("MRE") highlights the
potential for the deposit to support a larger, longer life mine. We revised
our model to incorporate the updated MRE, increasing the operation to
a 51Ktpa mine from 42Ktpa operation and our price target goes to $5.50
from $5.00. We maintain our Outperform, Speculative Risk rating.
Key points:
• Updated MRE to support larger mine: Marimaca announced an updated
MRE which includes a total resource of 222.2Mt @ 0.45% CuT compared
with our model 153.4Mt @ 0.54% CuT. Resource growth came through
the extension of the current deposit mostly at depth and management
has indicated that they will be exploring 50Ktpa and 60Ktpa copper
production cases with the DFS. We have revised our base case to a
51Ktpa copper mine, from 42Ktpa previously, by increasing mining rates.
We have also grossed up capex inline with the grossed up mining rates
and our NAVPS increased to $6.54/sh from $6.35/sh. We continue to
incorporate the mining of the higher grade core at the start of production
(50Mt @ 0.70% CuT) which benefits economics of the project. See our
initiation report for more details.
• Upcoming catalysts & funding situation: 28K meters of completed infill
drilling was not included in the updated MRE and these results (expected
to be released over the next few months) could be a catalyst for the stock
based on how grades and intercepts compare with the current model.
Management also plans to deliver a subsequent MRE in early 2023 which
will include this drilling with the goal of converting the remaining inferred
resources to the M&I category for the DFS (management expects to
deliver later in 2023). With the recent royalty sale in September 2022 we
estimate that the company is funded through the delivery of the DFS in
mid/late 2023 and at that point would look to obtain interim financing
to bridge the company until receipt of its permits (expected mid-2024)
and project financing.
• Upside potential through exploration: While the near-term focus is on
permitting and technical studies, there remains additional upside at
several underexplored targets on the Marimaca property in our view
(exhibit 4). These targets offer potential for mine life extension or further
expansions to the operation.
• Premium valuation for premium project: Marimaca is trading at a
premium to copper developers which we view as warranted given the
quality of the project. Marimaca shares are currently trading at 0.51x our
P/NAV estimate compared with the copper developer peers at 0.37x and
at 6.5¢/lb CuEq compared with the junior copper miners at 3.3¢/lb CuEq.
Our price target is based on a 0.80x multiple on our NAVPS for the project
and a 5¢/lb EV/in-situ value for exploration targets, consistent with how
we value other pre-production stage miners.