You have to factor in the dilution required to get through feasibility. MMG is fully financed through feasibility, whereas ZNC will need a lot more dilution before they get to the same stage, assuming they are successful in doing so, as will Copper Fox and Candente. If you look back to MMG's shares outstanding before last year's financing for the feasibility study (about 22 million fully diluted), even applying the current price to the stock, the market cap would be similar to ZNC's and smaller than Copper Fox's and Candente's. There aren't any lower-priced projects that I know of with as much in low-cost proven resources at the same stage of development, regardless of the metal, that are fully financed through feasibility.
MMG is years ahead of ZNC in development, has proven out many times more zinc, and is in Mexico vs. the riskier Peru. MMG has proven much more zinc resource than mid-tier zinc producers like HudBay and BWR, yet has a tiny fraction of their market cap (http://www.siliconinvestor.com/readmsg.aspx?msgid=22964401 ), even though their cost to produce refined zinc will likely be much lower because they will build their own refinery, bypassing the huge smelters' cut completely. Smelters's cut of profits are higher than all other production costs combined for most zinc miners.
With their existing infrastructure from their 45+ formerly producing mines and their refinery cost advantage, MMG is likely to be one of the lowest cost zinc producers in the world. Since GTI, the same company that did the feasibility for and moved Anglo American's similar Skorpion zinc mine (the lowest cost zinc producer in the industry) into profitable production at .35 zinc, is doing the feasibility study for MMG's zinc project, there's a very high probability for low-cost production success. Over 7 years ago, during the depth of the metals bear market, Skorpion was valued at more than MMG's current market cap. Zinc is now near $1.50, MMG is in much more desirable Mexico, there's much higher demand for zinc, and MMG has far more than just the zinc project.
MMG also has lots of high-grade silver, as their formerly producing mines only direct shipped the highest-grade ore, and they only shifted focus to the oxide zinc in 1999 when GTI came out with the positive feasibility study on Skorpion's similar oxide zinc deposit. MMG has had some of the best silver drill results I've ever seen, yet the company doesn't get credit in the marketplace for their silver: Message 23365385.
Copper Fox is also one of my favorite stocks, and I think it also goes much higher, but Schaft Creek doesn't have all the infrastructure required to go to production and Teck has a buyback option to buy back 75% of the project. As the infrastructure becomes more available with roads and power being supplied to nearby Galore Creek, I think the risks for Copper Fox will decrease significantly and the stock will appreciate.
I don't know Candente as well, but I did look at them vs. Copper Fox back in August: Message 22692788
Copper Fox has more than doubled since then and Candente has moved up about 35%, so both have been heading higher as the market has recognized their undervaluation. Candente may be held back because of their location in riskier Peru. Copper Fox is nearing completion of their pre-feasibility study and Candente is nearing completion of their scoping study, so both will need much more dilution to get through full feasibility.
The main difference between MMG and large copper projects is that there are very few world-class sized zinc projects in the pipeline for the next few years, whereas there are a large number for copper. The supply/demand situation for zinc is much tighter than for copper, as illustrated in this table: Message 23190905. Over the last year, LME copper stocks have increased over 68,000 tonnes while LME zinc stocks have decreased over 220,000 tonnes:
Given the relative scarcity of large zinc projects well into their feasibility study and the high likelihood of success given GTI's success with the similar Skorpion mine, MMG deserves a premium over similar sized copper projects. MMG is a rare junior with 100% ownership of a world-class low-cost zinc project in a politically safe location, and should be in very high demand after they complete their feasibility study by majors looking to replace zinc reserves. Their high-grade silver also gives them very high upside. |
