A very interesting press release from Candente Resources (DNT.to) today, the junior exploration-stage copper play run by Joey Freeze (i.e. class mgmt act) and owners of the Cañariaco greenfield in Peru.
The PR (linked right here) reports on the 3rd party economic assessment recently done for the project. There's the usual amount of blah blah (if you're a wonk like me, you should read the full PEA report by Samuel Eng. available on this link) but it all boils down to this chart....
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Cu Discounted NPV's (Post-Tax)
Price$/lb (x1,000,000) Pre-tax IRR Post-tax IRR
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0% 8% 10% % %
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1.75 $ 771 ($158) ($250) 7.4 5.6
2.00 $1397 $127 ($8) 12.4 9.9
2.25 $2024 $388 $210 16.9 13.5
2.50 $2651 $645 $424 21.2 16.7
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......and the capex price tag of U$1.17Bn. So zoom in on the 8% discounted NPV line (the traditional benchmark for projects such as this). We see that until we get to U$2.25/lb copper the IRR (internal rate of return, just a fancy way of saying "the money we'll make") isn't so great. Or put it another way; if you wanted to invest one point one seven billion dollars, you'd be looking for a decent profit, no?
The bottom line is that DNT.to, a pretty good set up as junior coppers go, has just presented a cold fact to the market; there will be no copper projects coming online until the metal gets back above $2 minimum. Not Cañariaco, not anywhere. That's because the DNT.to project is a very good benchmark in world-style numbers (relatively cheap, relatively big, relatively well-run, relatively well-designed etc). We have a very good reference point going forward. Until copper moves back above $2, the market will not get any new supply.
I like this news a lot.
As for Candente, the robust economics of just a few months ago have faded away. No market genius needed to work that out; all you need is a price chart handy.
There's hope for this stock here at 20c; if copper moves above $2 it's a double and if it goes above $3 then expect DNT.to to be a five-bagger or simply bought out by a major. Today's press release a nice, clear map for both DNT.to and the sector in which it works. Use it to your advantage.