Nevada Copper (NCU.TO) had an excellent second quarter of the year, as the company’s share price has almost doubled since our initial report in March. Back then, we were emphasizing the robust economics of the Pumpkin Hollow project which led us to believe the company’s market capitalization was way too low based on the quality of its assets in Nevada.
Introduction
Nevada Copper (NCU.TO) had an excellent second quarter of the year, as the company’s share price has almost doubled since our initial report in March. Back then, we were emphasizing the robust economics of the Pumpkin Hollow project which led us to believe the company’s market capitalization was way too low based on the quality of its assets in Nevada. Fortunately the market seems to have come to its senses again, and Nevada Copper’s share price has increased by 73% for a current share price of C$2.56 and a total market capitalization of C$206M.
Pumpkin Hollow – Phase 1
s expected, the construction activities are ongoing at the first Phase of the Pumpkin Hollow project which is fully permitted and almost fully financed to go into production. The production-sized shaft is currently at a depth of 950 feet which is halfway the planned 1906 feet, which means the company has made tremendous progress in the past few months. This is mainly due to a faster than expected sinking rate under the new contractor, which was able to put in several days of sinking the shaft 9-11 feet per day, which is much higher than the planned 6 to 7 feet a day.
At the end of June, the shaft sinking was put on a hold for approximately 10 days, as a mid-shaft pumping station had to be excavated. This is a normal course of business and Nevada Copper has reiterated there’s no water problem as the water inflows in the shaft are ‘minimal’ due to pumping from a nearby dewatering well and tighter ground conditions.
We met with CEO Giulio Bonifacio in Vancouver late last month, and he emphasized again that there were several options on the table to fund the remaining part of the Phase One capital expenditures. Additionally, we were reassured by the fact that there would definitely be a solution for the first repayment of the Red Kite loan which is due before the production start-up. As the CEO of Nevada Copper holds approximately 9% of the company’s fully diluted share count, you can be sure he’ll have the shareholders’ best interests in mind.
The Phase 2 Open Pit mine
We were hoping for some more (and faster) progression on the land change bill, but you obviously cannot force a government apparatus to work faster. According to Nevada Copper’s representation in Washington DC, both the congressmen and senators of Nevada remain committed to push this bill through. As a reminder, this land change bill will allow Nevada Copper to shorten the permitting process by approximately two years, as it would not have to go through the federal permitting hoops.
Even though this land change bill would make everybody’s life easier, it wouldn’t be a huge problem if the bill would be blocked. In the worst case scenario, the permitting process would take approximately two years longer, and that’s definitely not a huge disaster given the fact the company is now focusing on bringing the first phase of the project into production.
The impact of the Lumina Copper buyout on Nevada Copper
As you probably know, First Quantum Minerals (TSE:FM) has launched an offer to acquire Lumina Copper (LCC.V) which owns the large Taca Taca copper project in Argentina. The fact that First Quantum is willing to pay close to C$500M for Lumina Copper and is prepared to face and fund a project with an estimated price tag of close to $3B is encouraging for the entire sector.
Additionally, now Taca Taca will be owned by a senior copper producer another multi-billion pound project is gone. This once again emphasizes the quality of Nevada Copper’s asset again, as it is one of the very few projects with several billions of pounds of copper in a safe region. If First Quantum is willing to bet $3.5B on an Argentinean project, then you can be sure the Pumpkin Hollow project in Nevada will be on the radar screen of several other players in the sector.
Conclusion
No news is good news for Nevada Copper, and the shaft sinking is continuing according to plan which is all we could ask for. We are looking forward to see the shaft sinking being completed by the end of this year (and maybe earlier in Q4 if the contractor is able to have some more days of sinking the shaft 9-11 feet per day) and the construction of the processing plant should start within the next few months as the shaft sinking continues to progress.
We are also anxiously awaiting the land change bill, but want to repeat again there’s no immediate problem if the Senate and House don’t immediately approve the bill as Nevada Copper has been conducting baseline studies during the past four years and definitely wouldn’t have to start from scratch in case a federal permitting process would have to be initiated.
Finally, it’s good to see some M&A activity in the copper sector, and as Nevada Copper’s Pumpkin Hollow project is one of the few large advanced-stage copper projects in a safe region, it’s not unthinkable the company will ‘come into play’ sooner rather than later.
Disclosure: Nevada Copper Corp. is a sponsoring company. Please see our disclaimer for current positions.
