Comparing CCH now to 2002-2004
In my previous post, I gave the link to Campbell’s history (Highlights page), from their website:
ressourcescampbell.com
When I read all of this history, the thing that really stands out is that Campbell was able to successfully raise so many millions of dollars in 2003, 2004, and 2005. This firms investing were "blue chip", and we can be absolutely sure that they did extensive due diligence. Campbell was able to sell out private placements in the 80 cent range back then.
Emphasis: Sprott is investing $10 million right now (Sept 2006)
So let’s compare Campbell today to how Campbell looked, to an Institutional Investor, in 2002 – 2004
Back Then:
The Joe Mann mine was producing a lot more gold
Copper Rand was still a few years from being in production
Campbell owned only part of Copper Rand (not full ownership, like today)
Campbell had other properties, but none of them were near production
Now:
Joe Mann is older, but still has at least 18 months (at lower production)
Copper Rand has far exceeded expectations in size of the deposit, and ore grades. Early reports on Cooper Rand had the ore grades down around 1.15%. The last few quarters has seen copper grades above 2% from Copper Rand.
Cooper Rand is just 4-5 months away from full commercial production
Campbell has drilled the Corner Bay deposit. The deposit is massive – I calculate around 250 million lbs copper. You can get that number just by looking at the resource tonnage in all 3 categories of resource.
Corner Bay ore grades at very, very high (averaging 5% copper).
Campbell is only about a year from bringing the Cedar Bay extension online
Campbell will start production from Merrill Island later in September
Other “satellite deposits” may be brought online (it says that in recent press release).
Campbell now has 3 future royalty streams (Discovery, Eastmain, Pitt Gold project), that will be developed. The Pitt project is not exactly a royalty, but Campbell owns a certain percentage of the project, and does not have to pay a dime to develop it. I think the Eastmain mine is the closest to being opened (it’s an old mine). Eastmain Resources (ER.TO) will operate it. Campbell may own shares in either Strateco and/or Eastmain, depending on how the deals are closed.
Downside – about 5 times the number of CCH shares. The average number of shares at various points in 2002-2004 was around 80 million shares. But more than half of the new diluted shares will be held by Sprott and Nuinsco. Strong hands
Upside – commodity prices that will lead to profit margins more than 5x higher than the 2002-2004 time frame. For example, Copper Rand was planned and financed with a copper price expectation of only about $1.25 per pound. With copper at $3.60 (or even $3.00), the profit margin has grown 5x or 10x greater than what was anticipated a few years ago.
So in summary, we have more properties, better grades, new mines, and much higher metal prices, BUT about 5x as many shares.
BUT today’s price is also around 1/5 average the price in 2002 – 2004.
After the "walk-down" this week, today's price is even lower. And the ASK is very thin
So now the comparison shows swings sharply towards the conclusion that today’s purchaser is buying incredible value. Today’s purchaser is buying far more value than the “blue-chip” firms were buying 3 years ago.
4 year chart:
bigcharts.marketwatch.com
In other words, all of the positive corporate developments (new projects), and current production, and near term development, and higher metal prices OFFSET the dilution. The dilution has been about 5x (see clarification above).
But today’s share price is less than 1/5 the average price in 2002-2004. So today’s buyer is way ahead of these blue-chip firms that were buying a few years ago. |
