NCU near term production... We have a mine now!
Some guesses for current rate of
start up production (undergound 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 $1.89 per pound ($3.75 - $1.86 cost) = another $917,000 per month for a total of $1,668,000 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 $1.89 = $3,071,000 for a total of $3,822,000 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 $1.64 profit = $4,602,000 + $750,750 = $5,353,000 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 $8,856,000 per month profit.
- Multiply the 5.4 milliom pounds copper by 12 months and get back to NCU's prediction of about 65,000,000 pounds per year copper.
- Using a $3.75 copper price minus the $1.86 cost and get 65,000,000 pounds X $1.89 profit = $122 million yearly cash-flow (underground only.)
$122 million per year at a
5X multiple = $615 million, divided by 1.7 billion shares =
$.36 per share PLUS the open pit asset which is easily worth
$.18 per share today. Near term price $0.54 per share with a lot more upside from there.
DYODD
Regards,
Notgnu
RE:The law of averages
I wonder what will happen when they realize they fcuked up on the short bet re the dip in copper a couple weeks back.
Buying back 25,000,000 shares while we are all adding might just create some fun.
Watch this thread get interesting while they try doing that.
N.
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ Note: I confirmed today (Feb 9) that NCU insiders are blacked out until after the mid March year end release. ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ Notgnu (427)
User Actions
February 07, 2021 - 04:51 PM
89 Reads
Post# 32496832
A Re-post for our new NCU buyers.
NCU bankruptcy risk is now GONE due to the copper price increase
This alone accounts for a 50% to 100% possible increase to share price. Still only trading at .57 X Book value
My target price remains at $0.45 to $0.60 by mid to end of 2021 (assuming copper stays in at least the $3.40 to $3.50 range
Some reasons I own NCU shares:
- First in 10 yrs new USA copper producer
- The future open pits are now highly economic and are relatively high grade
- 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 0.57 X book value
- Full copper production next 6 to 12 weeks
- Hedged only about 25% over next 12 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
Risk include:
- Problems with the mine plan leading to more cost
- Copper price dropping a lot
- Mine accidents
- Another Covid shut down
- Outstanding lawsuits (I think they will be settled and are of minimal concern)
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
A calculation example with copper at $3.75
Take NCU's $1.89 cost per pound from the last presentation.
Subtract cost from price of copper = $1.86 profit before taxes.
Multiply by 62,000,000 pounds (conservative number) per year (underground only) after full 5000 tpd = $115,000,000 per year cash-flow
Multiply by 5X cash-flow multiple = $576,000
Divide by 1.7 B shares out = $0.34 per share
Add the value you would attribute to the future open pit (already permitted and significantly delineated by previous drilling and engineering studies) at $3.50 to $5.00 copper, mineable over the next 20 to 30 years (my valuation is $0.20 to $0.25 for that asset alone) and get a this year price of $0.54 to $0.59 per share.
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Some points about NCU, focussing on the underground portion:
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 $87.60 per ton, which gives about $42 a ton of gross profit = 95% 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
The following video link lines up with my own thesis on NCU .. that there is a big disconnect between price and value... his approach to calculating that is a little different than mine but the outcome is similar. If you do not want to watch it all then at least watch from minute 26 to minute 36.
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****** The Future Open Pit on sale for free right now *****
NCU timelines as laid out in the 43-101 mine plan, and older promotional material, is delayed by approximately one year.
In terms of the present share price of $0.16 the NCU market is attributing almost zero value to the open pit property and investments in it thus far. This is easily illustrated by looking at the current discount to NAV (0.57 x NAV)
The millions of dollars spent by NCU on drilling out the (relatively high grade) open pit projects (hard rock core retrieval drilling costs about $200 per meter) and all the engineering gone into creating the 43-101 along with pit shell design is not being priced in. The value of the full permitting, which is also huge isn't priced in.
Just look at the years of consulting and lobbying and meetings with community and environmental scoping and permits that are required to be able to get permission for a new huge open pit project most anywhere in the world.
The open pit and permit have a hugely leveraged value to metal prices. When copper was looking played out the entire asset was arguably just a money pit.
With the new copper, green energy, EV, grid build thesis the long term outlook and current pricing of this asset is way undervalued (IMO of course.)
Taking the open pit as a stand alone project, as distinct from the underground for now I see it this way:
A lot of money and years have gone into drilling and scoping the project.
More adjacent land has been acquired but not yet drilled.
The main pits also have not been fully drilled because resources were redirected to getting the underground mine built and producing (as is just starting to happen now.)
The underground mine, though separate, has overlapping infrastructure that hugely benefits advancing the open pit... everything from roads, power, offices and staff on site.
The open pit was designed using (predominantly) a $3.20 long term copper price
This is huge and below is why:
I have read through (skimmed some and triple read other areas) the NI 43-101 and in the end I confirmed that it is quite reasonable to just extrapolate from the summary of the open pit project as presented on the website here:
https://nevadacopper.com/projects/open-pit-development/
What I am doing is averaging the two mill capacities build outs that are stated thus we get about 56,000 tons per day for 17 to 18 years. (This, as noted above, could also easily be greatly expanded with more drilling.)
Take the stated free cash-flow average over the life of the mine (which uses $3.20 copper, $1325.00 gold and $20.00 silver) and apply your own, new, long term numbers.
Working backward the NCU numbers seem to me to average the copper, after recovery losses and blending and all else at about .39% of all rock mined.
So:
56,000 tons per day X .0039 = 218.4 tons per day of copper
218.4 tons X 2000 pounds per ton = 436,800 pounds per day of copper
436,800 pounds X 365 days per year = 159,432,000 pounds of copper per year.
Confirm number by multiplying let's call it 160 million pounds by the previous $1.17 of cash-flow (that is $3.20 price used minus $2.07 for ALL IN COST... including all machines, labour, interest charges, leases etc etc) and get $187,200,000 per year of free cash flow... quote from company "Annual free cash flow3 Avg cashflow $180Mpa of 17 steady state years"
Now take my new metal price assumptions (put in your own) and get 160 million pounds of copper per year (averaged over 17++ years) =
160 million pounds X $3.60 - $2.07 cost = $1.57 free cash-flow = $251,200,000 per year (plus increase gold and silver price... for others to work out as it is about 10% of overall metal values)
Or try copper at $3.85 and get $1.78 free cash flow X 160 million pounds per year = $284,800,000 per year!
Now try Goldman Sachs $4.50 copper in two years from now = 160,000,000 pounds per year X $2.43 = $388,800,000 per year plus extra gold and silver for 17 ++ years!
Then the next step is to try company valuations at different copper prices and different valuation multiples and then divide by 1.7 Billion shares:
$3.60 copper at 3x multiple = $251 million x 3 = $.44 per share, open pit only.
$3.60 copper at 5X multiple = $251 million x 5 = $.74 per share, open pit only.
$4.50 copper at 3X multiple = $388 million x 3 = $.68 per share, open pit only.
$4.50 copper at 5X multiple = $388 million x 5 = $1.14per share, open pit only.
So it is easy to see that the open pit is highly leveraged to metal price assumptions (please note I did not bother to add in increased silver / gold prices... That is a DIY :-)))
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Re-post from Feb 6:
I spoke to Rich at IR and he reminded me of a mention of the full US listing in a past press release. I haven't gone back and reread them but in our conversation he indicated it was likely to happen mid 2021 (the US listing) and that consolidation would be part of that process.
I agree with you on hoping the amount creates a new share price well over $3.00 so we can all obtain margin. I don't like being on the $3.00 border because MM's will play the line to take out margin call stop-losses (an annoying little game,) so assuming say a $0.25 share price at the time, then a 20:1 works well giving $5.00 + per share.
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Robert Pavich Video (last 10 minutes is gold)
https://www.youtube.com/watch?v=hk_WhFu7FlA&feature=emb_logo
Good luck to all, we have a winner here IMO
DYODD
Cheers,
Notgnu
(NCU, NWHM)
+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
A Gnu 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 over view.
I will later add it to my overal 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 57,000 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)
Cheers,
Notgnu
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ February 08, 2021 - 01:37 PM
59 Reads
Post# 32502529
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 imense and will pay this asset off very quickly, including the cost of building the (permitted) open pit portion.
Cheers,
Notgnu