World Copper Ltd.'s (WCU:TSX.V; WCUFF:OTCQB) Escalones copper-gold project in Chile will likely garner outside interest given its preliminary economic assessment (PEA) outlined a compelling mining operation, one that surpassed the expectations of Fundamental Research Corp., reported its head of research Sid Rajeev in a Feb. 18 research note. As such, Fundamental raised its fair value estimate on World Copper to CA$2.28 per share from CA$2.02.
"We believe the PEA puts the company in a strong position to attract joint venture/financing partners," commented Rajeev.
Trading at a discount
Currently, the copper explorer-developer is trading at about CA$0.84 per share, or 5% of the after-tax net present value discounted at 8% (NPV8%) of both Escalones and Zonia (at a US$3 per pound copper price), Rajeev pointed out.
This is significantly lower than its peers, which are trading between 20% and 40% of after-tax NPV8%. Fundamental rates World Copper Buy.
What the PEA Shows
Rajeev reviewed the highlights of the Escalones PEA. Incorporating 86% of Inferred resources, the report outlines an open-pit operation with a 50,000-ton-per-day throughput and 20-year life of mine (LOM). The LOM is longer than Fundamental expected it would be.
"Drilling results and/or mergers and acquisitions could be catalysts for World Copper this year," wrote Rajeev.
The base case, relayed Rajeev, shows that at a copper price of US$3.60 per pound and after tax, Escalones would have an NPV8% of US$1.5 billion (US$1.5B) and an internal rate of return (IRR) of 46%.
At US$4 per pound of copper, the NPV8% would increase to US$1.8B and the IRR to 53.6%. Post-tax capex and opex are relatively low and lower than what Fundamental anticipated.
"After incorporating the PEA's opex/capex/mine life estimates, our after-tax NPV8% estimate on Escalones increased from CA$226 million (CA$226M) to CA$552M," Rajeev indicated.
Next Steps at Projects
World Copper is well-positioned financially to proceed with its 2022 work plan for both projects. It has $2.5M in cash and $19M in in-the-money options and warrants.
The company will do resource expansion drilling at Escalones. At Zonia in Arizona (the acquisition of which just closed), plans call for definition drilling and updating the PEA.
"Drilling results and/or mergers and acquisitions could be catalysts for World Copper this year," wrote Rajeev.
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1) Doresa Banning wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
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Disclosures For Fundamental Research Corp., World Copper Ltd., Feburary 18, 2022
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