Copper Development Corporation is a fully funded, AIM listed gem whose efforts in the Philippines don’t really seem to be receiving the market recognition they deserve.
The recent drilling results from the company’s Basay deposit on Negros Island are a case in point. They threw up some of the best high grade intersections identified to date including 14.3 meters grading 5.47% copper. Yet this barely seemed to move the dial so far as the share price is concerned.
Mr Mitch Alland chairman of Copper Development Corporation said that “In the last 5 years how many times have we seen intersections like those? The market has slept through this one.”
The rather indifferent response to the latest data and a succession of earlier very positive updates reflects the state of the small cap market at the moment with risk averse investors taking their money off the table. This has been an indiscriminate sell off though in recent weeks, we have seen the first green shoots of a recovery.
The upturn can’t come quickly enough for CDC which has a decent tale to tell. It is essentially two copper investments wrapped up in one. The first Hinobaan will provide a near term interest while Basay the second, possibly more exciting investment has the potential to be a company maker.
Additionally, the CDC owns most of the tenements covering the 25 kilometers between the two deposits which becomes very important if Basay fulfils its potential. CDC owns 92.5% of the Hinoba, a 319 million tonne deposit grading 0.35% copper.
Mr Alland said that for a relatively small project on world scale, the economics are compelling and at 38.5% internal rate of return it is up there with some of the giant copper projects being developed by the industry’s super majors. That IRR is based on a mine producing 35,000 tonnes of copper a year for 18 years which gives a net present value of USD 485 million at a discount rate of 10%.
He said that the next big news from Hinoba will come next month when the group receives the results of a preliminary feasibility study for the project, which will allow CDC to go out and find a buyer or joint venture partner for the project. With infrastructure power and roads in place and easy access to the nearby ports, this will be one of the easier projects to develop.
Mr Alland revealed that CDC may sanction an outright sale or agree a joint venture where it retains a free carry for a minority stake in Hinoba. He hopes to have a deal tied up by the end of the year. With the PFS the project will be ready to go. Generally, it might appeal to the Chinese, Korean and Japanese trading and mining companies looking to secure a source of concentrate.”
If Hinoba is a neat, relatively small project, then Basay has the potential to be a monster in terms of its expected large size and grade. The block is 70% owned by CDC with the remainder held by Solfotara Mining Corporation a private Canadian company.
Last year a total of almost 22,000 meters were drilled and results later this month should confirm a historic resource in the order of 200 million tonnes. The plan for this year is to drill a minimum of 44,000 meters at a cost of about USD 15 million though the program could be far more ambitious than this.
Mr Alland said that “If we continue getting the fantastic intercepts we have been getting we will try to accelerate the program it may go to 60-80,000 meters. The difference is 44,000 meters might take it to 500 million tonnes. With 60 to 80,000 we might make it to 1 billion tonnes now that is a very large project. How long we take to prove it up who knows? If it is 1 billion tonnes then we might be able do to it in the next year. If it is 4 billion it will take longer.”
(Sourced from www.proactiveinvestors.co.uk)
