Tuesday, September 21, 2010

Los Azules gets more attention TNR.v MAI.to CUM.v,

Copper has rebounded nicely from a demand shock thanks to the confirmation of a boom in China and India (BRIC nations). A well known Investment Banker said it best - you can't beat the desire of 3 billion people in China aiming to improve their lives and infrastructures in their country.

You need copper for the wiring, reinforcements, beams - anything to do with building and electronics.

In addition to surging foreign currency supplies - China has been on a buying spree of Canadian resources - seeing as how TSXV and Canada has only been welcoming China investment (CIC Fund + Teck Cominco anyone?), this is something we only expect more and more.

The Globe & Mail is a well known independent newsprint (outside of the Conrad Black empire of Vancouver Sun, Province, and National Post), so when a copper junior buyout list was summarized, many of the companies on the list surged on just how undervalued many of the groups are.

Specifically, the legal disputed project Los Azules, which had only been growing in resource since we first covered the project as one of the crown jewels in junior miner TNR's portfolio.

MAI and TNR promptly surged a bit the following days after the article - it is good to be ahead of the trend here at Mining101.

We'd also like to note since the security review of MAI - the NI-43101 resource has been upgraded to nearly 13.2 + billion lbs of copper, 1 million ounce of gold, and 10+ million oz silver. This should've certainly placed MAI in a much higher spot.

The recent Andean (AND.to) buyout in Argentina is right nearby - should only indicate these stocks TNR / MAI should have plenty of room to move up.

TNR Gold Corp's current market cap is a paltry $24 million.

At a conservative 15% equity interest in Los Azules, not even accounting for the critical infrastructure property that Escorpio IV brings to the table, using realistic 50% of Minera Ande's current market cap.

Minera Andes (MAI.to)
$1.20/share x 264 million shares o/s = $317 million
at 50% of market cap for Los Azules = $158 million

15% of Los Azules = $23.78 million
Say a small flat fee for rights to Escorpio IV ~ $2.5 million.
TOTALS only to $26.25 million
This is already more than what the market cap of TNR is telling us its worth, and International Lithium ($15 million value) hasn't been spun off yet either!

This is a great buy IMO and Mining101 is still fully behind the team at TNR Gold Corp. We only hope that they can get ILC public faster as various other groups are beginning to work on their lithium deals in South America again and TNR cannot afford to fall behind further.

Tuesday, September 14, 2010 7:22 PM

Junior producers likely to benefit from China’s appetite for copper

Simon Avery

What are we looking for?

China has a voracious appetite for copper. Demand for the red metal is traditionally a harbinger of economic strength and is used extensively in construction, transportation, electronics, plumbing and even in the currencies of nations themselves. China consumes 39 per cent of global production but has only about 6 per cent of the world’s reserves.

CIBC World Markets analyst Ian Parkinson has done an extensive review of junior copper producers that trade on the Toronto Stock Exchange, combing through more than 160 companies and more than 200 projects to determine which players are most likely to draw the acquisitive eye of large mining companies and sovereign wealth funds in China, India, Brazil and other developing economies. He says merger and acquisition activity is set to ramp up in the space and investors who choose the most attractive junior players will see substantial returns. “In very simplistic terms, we believe if you’re long what China’s short, you’re in a good position.”

The screen

Mr. Parkinson zeroed in on junior copper producers with “pounds in the ground” that he calculated would be on the radar screens of international investors.

He created a weighting formula to capture how the market values these firms. In the process he looked at historical transactions and total acquisitions costs, and he weighed resource criteria, including deposit size and grade as well as mining methods and proximity to infrastructure and markets. He assessed the grade of projects with the assumption that higher-grade products typically carry lower operating costs, and he calculated cash costs of production as well as capital expenditure required on a per-pound basis.

In terms of valuations, he used enterprise value divided by the amount of reserves. He also looked at market capitalization relative to the required initial capital in an effort to gauge how the market is valuing the likelihood of the companies actually building their projects.

What did we find?

At the top of the list of 25 stands Duluth Metals Ltd., which is in the advanced stages of mineral exploration and has completed preliminary economic assessments on a large underground site in northeaster Minnesota.

Number two ranked PolyMet Mining Corp. is developing a copper-nickel-precious metals project in northeastern Minnesota and owns a crushing and milling facility and other infrastructure nearby. The state government is close to completing an environmental review and the company will begin project construction upon receipt of permits, Mr. Parkinson says.

The third ranked firm is Western Copper Corp., a Vancouver-based entity spun out from Western Silver Corp. in 2006. It holds significant gold, copper and molybdenum resources and reserves in four Canadian properties, he says.

“We would say this group [of 25] represents some of the best junior Americas-focused copper names currently listed on the TSX and a basket approach with the group could be advantageous for investors,” Mr. Parkinson says.

CIBC Junior Copper Rankings
Company Ticker CIBC
Strategic Partnership
Duluth Metals Ltd DM-T 4.95 218 1 Antofagasta has 40% interest in Nokomis
PolyMet Mining Corp POM-T 6.75 225 2 Glencore owns 6.3% and Cliffs Natural Resources owns 6.1%
Western Copper Corp WRN-T 7.65 105 3
Terrane Metals Corp TRX-X 7.85 639 4 Proposed acquisition by Thompson Creek Metals
Augusta Resource Corp AZC-T 8.75 360 5 HudBay owns 11% (13.6% fully diluted)
Antares Minerals Inc ANM-X 9.55 251 6
Far West Mining Ltd FWM-T 9.85 273 7 Quadra FNX owns 7.9% (14.64% fully diluted)
Copper Fox Metals Inc CUU-X 10.05 211 8
Minera Andes Inc MAI-T 10.85 262 9
Nevada Copper Corp NCU-T 10.95 165 10 Capstone owns 11.1% (14.4% fully diluted)
Coro Mining Corp COP-T 11.55 57 11
Redhawk Resources Inc RDK-X 11.65 49 12
Candente Resource Corp CDG-T 12.65 35 13
Baja Mining Corp BAJ-T 13.55 136 14 25% partner on Boleo with a consortium of South Korean companie