Claude:
We had talked about Metallica briefly...
Since taking a position in it again, I've taken another look at the fundamentals and the more I look at it, the more I like what I see. I agree that Noranda's decision to not do more exploration at El Morro this year is disappointing, but I presume they're just waiting for higher Cu prices. El Morro still contains about 7 billion lbs of Cu and 8 million ozs of Au which isn't going away, so I can wait a couple of few years for that one since Noranda has to pay all the bills!
Meanwhile, I think there could be some very positive developments at Cerro San Pedro in Mexico this year. I checked on Glamis' website (since GLG is the 50% JV partner and operator at Cerro San Pedro). Their revised feasibility study shows future production of 80,000 oz Au per year at a total cash cost of $125/oz. Permitting and final engineering studies are completed. The project is "ready to go".
At $300 POG they estimated an IRR of 20%, which would presumably be even better at $350 POG. And then there's an interesting note included in Glamis' recent slide presentation on the status of Cerro San Pedro: "Discussions with Joint Venture partner to determine optimum means of proceeding". i.e. They want to "proceed".
My suspicion is that Glamis sees 50% of Cerro San Pedro as too small for two companies to be involved and is discussing with MR that one or the other should take over the full 100% and get the project started asap. If this happens, IMHO it would be very beneficial to MR, whether it gets the mine or gets paid for its 50%.
MR's 50% share of the San Pedro deposit is about 1 million oz AuE, and with $4 million in the bank and no debt, I don't see much downside from here -- with lots of potential and the massive deposit at El Morro "thrown in for free".
I may be way off base here, but I'm betting that this could be a good year for Metallica.
Please let me know if you think this doesn't make any sense!
Thanks,
Howy |
