NCU cost to produce copper first 5 years = $1.86 per pound
Copper price at last financing was $2.95 so profit was $1.09
$3.57 copper now less $2.95 =
$1.72 profit now vs $1.09 in July $1.09 to $1.72
= 59 % increase sine July Future open pit economics have an even bigger marginal gain Reasons I own NCU shares:
- Trading at 0.4 X book value... crazy IMO
- No material insider selling for 10 yrs
- Fallout from Covid shut down depressed the price dramatically
- Safe & friendly jurisdiction
- First new in 10 yrs USA copper producer
- Mine already paid for by past shareholders
- Copper demand guy is soon POTUS
- Copper already running up ahead of expectations
- Big leverage to copper price gain
- New mill passed to run at design of 5000 tpd
- Full copper production next 8 to 16 week
- Hoisting and ventilation shafts almost completed
- Hedged only about 25% over next 12 months
- Vaccine news removes much Covid uncertainty
- Copper is 59% higher marginal profit than at last financing (all in cost $1.86)
- Tax loss selling is still an unknown speculation
- Consolidation may happen (I am in favour: margin can be had and institutions can buy (I prefer 40:1)
- Flippers periodically dump into the bid... yes, volitility to be expected
- Shorts probably covered… not sure
- Debt financing done to access high grade stopes
- Banks willing to lend at reasonable rates (interbank rate + 4.9%)
- Highly experienced CEO on board and he was granted 3,500,000 share rights, which align him with shareholders.
- Capital will come with excercise of $.20 warrants to fund future expansion.
Interpretation of 2020 share price collapse: It was a bad combination of only barely having the funds to get to cashflow after a long and winding road to build a fantastic new mine with great long term resources.
Then Covid hit and the mine was shut down. Cash was not there and only punitive type mezzanine financing was available. At the same time it looked like the US was going into massive social upheaval and it looked like the "less copper" guy (trump) was going to get in so not much appreciation in copper prices.
A bunch of selling came in with very little buying. Then the situation changed but investors were scared and it was up to "speculators" like myself to step in. So short term traders (not me) and speculators have been buying. The more conservative "investors" are probably still on the sidelines waiting for ... some stuff that they wait for. I am buying bag loads and could get killed on this or could come out with another 69 Impala worth of profit (inside joke... sorry) Insider average costs: Pala / Iorich > $0.55
NCU director Nutter (great name!) > $0.32
NCU director Albanese > $ 0.41 per share
NCU director Brown > $0.31
NCU chairman Gill > $0.21
NCU senior VP Joseph > $.32
NCU director Cochrane > $0.67
Thoughts on recent copper price gains:
Open pit cash-flow projection doubles at $3.50 vs $3.00
See slide# 14 = Open pit economics
1 year cashflow equals current market cap of NCU
https://nevadacopper.com/site/assets/files/4190/ncu_october_2020_final.pdf
https://nevadacopper.com/projects/pumpkin-hollow-overview/
Dec 6,2020 article:
https://www.mining.com/web/copper-the-most-critical-metal/ A note on NCU share increase math:
Commodity price increases benfit higher, cost minimally hedged companies more
Company A produces copper at $0.00 per pound (maybe due to gold credits)
Company B produces copper at $2.00 per pound
A copper move up from $2.90 to $3.50:
Profit at Company A goes up about 15% or so
Profit at company B goes up about 75% or so (not exact but you get it)
Company B trades at 0.5X NAV due to dilution fear
Company A trades at 2.0X NAV due to low debt risk
Company B benefits more than company A from the improved outlook and copper bull market
Notgnu
Freelance Investor Information for NCU.
(NCU,KRR, and NWHM ....remember to buy some NWHM and
let me know how well it worked out in a year from now :-)