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Copper Companies Summary
    Jan 14 2014

Candente Copper (DNT)

    Valuation

    Jan 14 2014 closing price - $0.24/share, model price at IPO $1.30/share using a 15% discount rate (see Assumptions on front page of Candente Copper Financial Model PDF).

    The Good

    14.19% Unlevered after tax IRR (includes a $2B construction cost per S. Waller in Nov 2012, and a T Kingston estimate of a 20% increase in mining, processing, and G&A Costs from the March 2011 AMEC Pre-Feasibility Progress Report); 0.40% average Cu grade of ore mined, 728 million tonnes of ore to be mined (i.e. BIG deposit); 70% of local population support project, strong central government support; upside potential from Canariaco Sur and Quebrada Verde not included in this analysis (increased mine life and/or ore mixing benefits).

    The Bad

    Arsenic in ore; Northern Peru - Anti-Mining Activists are active in the local area - they spread a lot of fear among the local population and investors; Limited fire damage to forest and a few small buildings was incurred by radicals in Dec 2012; Company will have very limited financial resources end of 2013; Company will have to raise funds to complete feasibility study. Net Cash and AP from Q3 2013 financial statements indicates the company has very limited cash resources.

    The Bottom Line

    You have to be satisfied that the rule of law will prevail in Peru and that the central government and local population do indeed support and will continue to support the project. Further you have to be satisfied that arsenic in the final concentrate can be reduced to non-penalty levels by roasting or other means. And finally you have to be satisfied the next financing can be completed without major dilution, although the current price appears to reflect this unknown.

Augusta Resource (AZC)

    Valuation

    Jan 14 2014 closing price - $1.41/share, model price at IPO $4.87/share using a 12% discount rate.

    The Good

    18.43% Unlevered after tax IRR; 0.44% average Cu grade of ore mined, 600 million tonnes of ore to be mined (i.e. BIG deposit), politically stable region, sold forward all gold at $450/oz and silver at $3.90/oz to Silver Wheaton in exchange for $230M when material permits are received; project can handle the lowest copper price of the seven companies and still be economic.

    The Bad

    option to buy in 20% of project by a third party (Note: the model price of $4.87/share assumes this is exercised); Possible permitting issues (see Nov 20 2013 news release)

    The Bottom Line

    This is likely the safest investment of the seven projects; the project can handle the lowest copper price of the seven companies and still be economic. This project has the highest Unlevered after tax IRR of the seven projects.

Lumina Copper (LCC)

    Valuation

    Jan 14 2014 closing price $6.25/share, model price at IPO $19.04/share using a 15% discount rate.

    The Good

    16.46% Unlevered after tax IRR; 1.65 billion tonnes of ore to be mined; 0.46% average Cu grade of ore mined.

    The Bad

    Argentina (high taxes); high percentage of revenue to pay royalties and taxes, the highest of the seven projects.

    The Bottom Line

    Great deposit and project, high taxes and high country risk.

Nevada Copper (NCU)

    Valuation

    Jan 14 2014 closing price $1.26/share, model price at IPO $1.18/share using a 12% discount rate; The company has updated somewhat separate feasibility studies for the underground and open pit mining operations; however this updated information was not used in this analysis because it did not include an annual production schedule complete with grades and recoveries like the original feasibility study. The construction and operating costs used in this analysis were taken from the Feb 03 2012 Feasibility Study. The company is fully permitted for the underground mine and this is under construction with first production targeted for Q4 2015.

    The Good

    0.53% average Cu grade of ore mined (open pit and underground), 365 million tonnes of ore to be mined; politically stable region, no major permitting issues.

    The Bad

    only a 10.32% Unlevered after tax IRR; $1B of sustaining capital required - this is three to four times the average of other projects.

    The Bottom Line

    Until the company provides an annual production schedule complete with grades and recoveries for both the underground and open pit operations, it is difficult to make a call on this one.

Yellowhead Mining (YMI)

    Valuation

    Jan 14 2014 closing price $0.205/share, model price at IPO $0.53/share using a 12% discount rate.

    The Good

    704 million tonnes of ore to be mined; excellent infrastructure already in place or nearby; politically stable region, no major permitting issues.

    The Bad

    only a 10.05% Unlevered after tax IRR; lower grade deposit, 0.262% average Cu grade of ore to be mined, average tonne of ore milled has pay revenue of only $14.44 based on $2.75Cu, $1200Au and $22.00Ag;

    The Bottom Line

    Project requires a high copper price to be economic.

Catalyst Copper (CCY)

    Valuation

    Jan 14 2014 closing price $0.05/share, model price at IPO $0.00/share using a 12% discount rate.

    The Good

    588 million tonnes of ore to be mined; 0.37% average Cu grade of ore mined; politically stable region, no major permitting issues.

    The Bad

    only a 8.29% Unlevered after tax IRR; high mining costs and processing costs, $5.80 and $6.17 per tonne milled, respectively; Arsenic in ore.

    The Bottom Line

    Project requires a high copper price to be economic, the highest of the seven projects; high mining costs and processing costs, $5.80 and $6.17 per tonne milled, respectively.

Northern Dynasty (NDM)

    Valuation

    Jan 14 2014 closing price $1.52/share, model price at IPO $5.40/share using a 12% discount rate.

    The Good

    3.4 billion tonnes of ore to be mined over 45 years (likely minimum 78 year mine life); 0.45% average Cu grade of ore mined (45 yrs); very high gold in ore for a copper mine - 0.386 grams/tonne Au (45 yrs); politically stable region; NDM owns 100% of the project.

    The Bad

    only a 10.27% Unlevered after tax IRR; deposit is near one of the world's greatest salmon resources; there will be environmental permitting issues; no infrastructure in place, will have to build own power plant, etc.; Anglo American, previously 50% partner, backed out of project recently; offset (the good) is Anglo American already spent $M 514 on project and NDM now owns 100% of project; high construction cost $B 5.8; NDM has commercial operation beginning in 2021 - this analysis has commercial operation Jan 2019.

    The Bottom Line

    Huge deposit; Pebble is the World's Largest Undeveloped Copper Resource per NDM - 0.83% Cu Equivalent grade per NDM Sep 2013 Corp presentation.