|Post from Hot Copper 17-11-16
In regards to FND they are (supposedly) at the end of a major capex spend and now stand on the brink of producing 28,000 tons of copper per annum. Depending on whether you listen to Euroz or Argonaut, both of whom have assessed the project, all in costs should be $1.30 or $1.50 per pound. So at current Cu prices lets make it easy and say FND can make a margin of 1 buck per pound after all costs. There are 2200 pounds in a ton
28,000 x 2,200 = 61.6 million pounds per year and at 1 buck a pound that means the project will make 61.6 mill bucks per annum at current copper prices. However FND only owns 72% of the project BUT these numbers are in USD. Again let's make it easy and say that 1 USD = .75 AUD. Therefore FND's share in AUD will be:
72/75 x 61.6 mill = approx $59.1 mill AUD
At the moment FND's market cap, even after the dilution of the recent cap raise is approx $120 mill. So if FND can achieve what they say they can then annual earnings, at current Cu prices, will be equal to half the value of the company at this time. By anyone's calculation that is not overvalued and in fact is way undervalued....
however, for the moment, I see a few factors holding it back a bit.
1. They have not yet achieved steady state name plate. Brokers envisaged this would have been achieved earlier in the year and we still aren't there yet.
2. Yes the CR will be a bit of a weight. No matter how good the project is there will always be some "sophisticated investors" (ha freaking ha) that will partake of the CR and flip the shares for 25% profit asap.
3. There is about 100 mill of capex debt to be repaid that should be able to be cleared in under 2 years at current Cu prices assuming predicted operating costs and levels are achieved.
4. The timing of the CR makes me nervous as it all seemed too bizarre for my liking. Why would you dilute at all let alone at these low levels if you are on the cusp of raking in 60 mill pa?? Surely even with the debt that needs repaying a bit of cash could be held back to use in increasing the projects value. My experience is that when something doesn't make sense based on what we know it usually means there is something that we don't yet know. I hope I am wrong on that point but at this stage the seemingly illogical CR must be put down as a risk factor.
5. They do need to increase the mine life beyond the current predicted 7 years. Prospects for this are promising on satellite drill targets but the sooner they get a drill in the ground and get some good hits the better.
So in summary there is risk but if you want multibagging upside you usually need to have your eyes open to the risks. That said if they can even just get the plant running at steady state nameplate and if Cu can maintain the current price then this should at least double easy peasy. And as debt decreases and if they can increase the resource size it should multibag.....all in my opinion.|
|Hi engelo. The problem with FND is that it is based in Indonesia, and they move at glacial pace. So here we are, near the end of may still waiting for the gazetting. Although it says in report its a case of when, not if and I have no reason to doubt them.
Since your post we have had the 17th may updated feasibility study and it makes for great reading. The capital costs have gone up a small amount, but everything else was very positive.
It is very likely we have 1 extra years production from improved recovery rates. Kali deposit is bigger than previously reported. Then we have the Meron deposit which they plan to drill 5000m. This has potential to be similar to lerokis, and another 1 year plus production. Not to mention possible gold! 100,000 ounces mentioned in previous documents.
We have agreement to sell all the copper produced. Everything is in place. We are low cost $1.07lb so we can take a hit on the copper price, although not ideal granted.
We have many broker notes ranging from 60c to 80c, which is double share price I have been invested since may 2009, 3 years. And although had a nice profit at 45c, which was for a long time, have now made zilch!!! however i am in no way tempted to leave. the potential is too good, and the cash flows will be to high not to hit 60c plus. My target has been and remains 50p. All the best|
|tarnow: thanks for your summary. We'll do very well here imo, just a matter of time. In these mkts any news with the word 2013 (or greater) in it is taken as the kiss of death :-(
lucky_punter: we're on the same track :-) Never had to wait for a gazetting before: new experience.
How many others out there? Confident that Chip is still in for the long haul :-)|
|Finders Resources' (ASX:FND) progress on its Wetar copper project has been sure and steady at a time when other early stage mine projects have stuttered.
|from Proactive: http://www.proactiveinvestors.co.uk/companies/market_reports/42684/proactive-news-summary-shanta-gold-finders-resources-strategic-minerals-carpathian-borders-southern-petroleum-0000.html
Finders' progress on its Wetar copper project has been sure and steady at a time when other early stage mine projects have stuttered.
Aside from the general global economic uncertainty, Wetar is an island off Indonesia, where the mining environment has become a lot more hostile over the past year.
Finders, nonetheless, has ticked off a string of major milestones in the past six months and now is just awaiting the final procedure of "gazetting" changes to the forestry around the mine before it begins construction in earnest.
The new spatial plan of Maluku, which releases much of the project location from forestry zones, is currently being gazetted; the Minister of Forestry is set to release new maps for formal signing by the Maluku Governor and Regents, so the completion of gazetting should not be long coming.
Progress otherwise has been impressive including the confirmation of US138 million of project finance in December.
Financial heavyweights Barclays Capital, Credit Suisse and Standard Bank will make the money available in 2012 to fund the mine building costs.
The facilities include a term loan of up to US$103 million to fund construction, a cost overrun facility of US$20 million and a working capital facility of US $15 million.|
|Hi Engelo. Yes, I was really pleased when I saw the RNS for the above. I've always liked the ojolali project., and if they can speed things up with it, drill more etc. Then has to be good. You could in a couple of years have a company producing copper, gold and silver. The upside to FND is still HUge IMO. As the company is undervalued from Wetar copper alone. Then you have potential gold from Mekon cap and lerokis on the same island. And gold/silver from Ojolai project. This year and next will be great for FND as they become cashflow positive. Allowing further drilling and resource upgrades|
|Hi Chip, thanks for your views on our common investments. The placing has to be done when sentiment has changed and when/if copper recovers. Then the dilution is less. They shouldn't have to rush it as they can build phase 1, the expanded demo plant from the banks money. The selling of ojolali I wouldn't like. They have a resource of 200,000 ounces and they could easily start up a small operation producing 20,000 ounces per annum. Generating 32 million dollars revenue. Also Tambang has massive silver resources potentially. 40 million inferred ounces, but difficult metallurgy from tests. I would hope they crack on with it. HMB is all about the u/g mine. If that is up and running on schedule, then HMB will re-rate in a big way. VGM you have to believe that eventually the development will be finished and the promised 100,000 ounces with reduced costs can be achieved. Its all about the grades. Vgm is high grade mine and when developed it should produce 25,000 ounces a qtr. Done it for 1 qtr already. The same for HMB 4g/t underground only 1g open pit. The difference in cash costs will be huge. A profit even LOL. All the best Chip. With luck we will be sitting pretty end of 2012. Next year is big for HMB, and VGM. No more excuses. FND is for 2013.|
In their different ways, all three stocks are requiring patience!
FND will take until 2013 to get up to full production. In the meantime there is likely to be a placing to secure the balance of the CAPEX, having secured the debt proportion from a bank syndicate.
The high-grade nature of the Wetar deposits is pretty exceptional these days and the LME grade Cu output from the SX/EW should attract a premium because of their geographical positioning.
The expanded demo plant should be in production in c. 12 months providing some useful early cash-flow. There must also be a likelihood of Ojolali being sold off as it does not seem to fit well with their Wetar set-up.
But much will depend upon the price of copper!
With VGM I am not expecting much for the Sep or Dec quarters but will hope to add to my holding in the Mar quarter as they reach the end of the mine re-development phase.
With HMB, in spite of everything, I remain positive regarding the upside potential to come. Over the shorter term they may be a bit squeezed for working capital so they do need to bring the U/G on-line, on time. A few quarters of cash-flows from the higher-grade production could transform the outlook and the recent additions of the two new project areas would then be a clear path to growth. But as ever with mining companies, there are always a few 'ifs & buts' so I am reserving full judgement until I see clear delivery by the new CEO.
Good luck with your investing.
|Thanks Chip. I am just interested in how you see it now. I have two other shares in common with you HMB and VGM. They are proving very disappointing, and I am sitting on substantial losses on both. But I still feel confident that if, (and it is a big if) they get their act together next year then the potential of both companies is huge. I still see this gold bull market going much higher in the next 3-5yrs. And eventually the juniors will re-rate. FND I don't worry about either, as I like the company and feel that as their costs are very low, even in a crashed copper market they can make money. Combining this with the potential gold/silver resource increases as they drill, which would help it diversify.|
Sorry, I have been very busy lately and have only just seen your post. I will update the summary estimates as soon as possible.
|.. and re-crashed ;-)|
|Harvey: seems to have uncrashed to-day ;-)|
|What the ??!! Price crashing ...|
|Hi Chip. We have had a lot of broker notes recently for FND. With new firms covering the stock. The broker targets for 1 year vary from 60c to 80c depending on share dilution for fund raising. I am interested in your target now as your previous forecasts in post 1 are over a year old. Anyone else please feel free to give their 1 year target price and reasons.|
|Here is the link:
|Company reports it is to raise US$138m to fund Wetar.
ASX announcement today.|
|chip: not before time! Up again to-day and near all time (or at least recent) high.
Was watching DME on your mention somewhere but watching wasn't good enough! Well done.|
|Yes, and DME up a similar amount on big volume on the asx. Looks like the copper stocks are coming into the ascendency at the moment.
|up 6.8% on ASX|
|up 10.5% in OZ
but just noticed on a single 10,000 trade|
|Chip: thanks for BFS. Payback for capital costs in 1 year :-))
Up 14.1% in Oz: looking very good (in contrast to all my other copper stocks)!|
|23 page BFS document released today. It's a summary of course, but so nice to have a company actually release the info!
|Up 6.58% in OZ|
|chip: modest as always! Don't think you miss much. I try to wade through Hotcopper from time to time but find it difficult to find the best posts.
We all needed this to-day! Continued grim elsewhere. A little relative cheer from my Cu stocks overall, WTI honourable exception: what a train wreck there. Have you had a look at CAML? I have bought in recently on a 6 month plus view following a steer from Wassapper on MNC.