ASX:MNC | A¢0.3 | US$9m | Speculative Buy
Investment Agreement for Los Calatos
Metminco has announced (further to its release on 14 June 2016) that it has entered into a formal Investment Agreement for equity funding of up to US$45m into the Los Calatos Project from CD Capital. The first US$16m tranche is expected to be received in late August or early September, upon settlement of the transaction, with Tranches 2 & 3 to be received over a 3-4 year timeframe at CD’s discretion, enabling PFS and DFS completion.
COMMENT: CD Capital’s investment represents the successful conclusion of lengthy negotiations to bring in a strategic partner for the large-scale Los Calatos copper porphyry project. We re-emphasise that the structure of the transaction, involving staged investment at the project level, is also favourable to Metminco, allowing Los Calatos to be funded without dilution to existing MNC shareholders, and it is at a significant premium to any foreseeable near-term equity investment in the company. Following the transaction settlement the initial foci will be: resource upgrading and expansion, with further drilling planned for the TD2 and TD3 targets; PFS-level metallurgical test-work; and progression of permitting. Both Metminco and CD Capital will have representatives on the board of the project operating entity.
CD Capital will have a 70% interest in Los Calatos following US$45m investment — The financing is planned to enable the completion of pre-feasibility (~US$15m) and feasibility (~US$25m) studies on Los Calatos.
• Tranche 1 — On settlement, CD Capital Fund will invest US$16m into the project in return for a 51% interest in the holding company Los Calatos Mining.
• Tranche 2 — CD Capital Fund will have the option to invest US$14.5m in return for a further 14%, taking its interest to 65%.
• Tranche 3 — CD Capital Fund will also have the option to invest US$14.5m in return for an additional 5% interest, taking its stake in Los Calatos to 70%.
As per the September 2015 Strategic Mining Study, Los Calatos has the potential to deliver 50,000tpa of copper for 22 years at AISC of USS$1.45/lb — The Los Calatos Project had previously been outlined as a mega, bulk mining, open-pit and block caving operation, as per the August 2013 study. It was subsequently downscaled to enable higher returns at improved grades and lower capex. The new project scope comprises a mineable resource inventory of 134Mt, grading 0.89% Cu and 0.036% Mo, supporting a 6.5Mtpa underground mining operation.
Los Calatos’ post-tax NPV8 was US$447m with an IRR of 17% at US$3.00/lb copper, with initial capex of US$655m — Both Los Calatos’ sustaining costs and the capital intensity of US$13,100/tpa of capacity are competitive relative to development-stage peers. The IRR of 17% at a copper price of US$3.00/lb and a molybdenum price of US$11.16/lb, derived from the scoping study level report, demonstrates the project’s development potential in a recovering copper price environment.
ASX:PEN | A$0.69 | US$93m | Buy | TP : A$0.95
DRA Investment Partner Funds Karoo Feasibility Study
Peninsula Energy has announced that it has entered into a subscription agreement with Concentrate Capital Partners, an independent investment partner to EPCM contractor DRA Global, for 976,696 fully-paid Peninsula shares at an issue price of A$0.80, for a value of A$0.8m. Peninsula will issue these shares to CCP upon receipt of invoices from DRA relating to PFS work completed on the Karoo Project, for which DRA has been contracted to complete the preliminary mining, process engineering and metallurgical test-work.
COMMENT: Contractor DRA’s willingness to take equity as a consideration for work completed on Karoo serves as an indication of support in the project’s potential, in addition to alleviating a portion of the funding requirement to bring it to the PFS stage. With Indicated resources of 22Mlb eU3O8 at a grade of 1,242ppm and Inferred resources of 35Mlb at 1,038ppm, the Karoo Project benefits from both high grades and relatively shallow depth, and has the capacity to offer both significant scale and longer-term potential. We continue to believe its value remains largely overlooked by the market, and look to PFS-related newsflow to increase confidence in the project’s parameters.