Misunderstanding of Registration of Santo Tomas

by | Oct 1, 2019 | General | 0 comments

I continue to pound the table on Oroco Resources, the owner of Santo Tomas Copper Project. I have never see anything as good as Oroco Resources. Even though the stock already appreciated 1,000 percent for me, I did not sell a single share yet. This is because there is another 1,000 percent left or more.

I continue to get astounded by others who do not see this opportunity the way I do. The project is massive. Even at copper price of $2.50 per pound, NPV is $1 billion with payback period of about 5 years. So what is stopping investors from buying?

I believe it is the misunderstanding of the title registration. Right now Santo Tomas is owned by Xochipala Gold but the title is registered to CMR. Oroco is in the process of REREGISTERING the title from CMR to Xochipala Gold. I said reregistering because Oroco controls CMR and Xochipala Gold. So it is basically moving the registration from one controlled entity to another. It is a voluntary thing. It is like moving your wallet from your right to the left pocket. You own the wallet and it doesn’t matter which pocked it is in.

Right now investors and potential investors believe that nothing can happen without the registration taking place. This is completely not true. Some of you are expressing concerns to me such as

  • without registration, Oroco cannot raise money for drilling
  • without registration, Oroco/Santo Tomas cannot be bought out
  • without registration, Oroco does not own the asset

These are not true at all. Oroco can raise money and will raise money with or without the registration. It can most definitely be bought out with or without the registration. And it definitely owns the asset with or without the registration to Xochipala Gold.

The reason why Oroco voluntarily wants to reregister the title from CMR to Xochipala Gold is because Xochipala Gold owns Santo Tomas. Xochipala Gold is a better entity to own Santo Tomas than CMR because of the earn-in schedule. In Xochipala Gold, Oroco will be able to earn up to 81 per cent of the interest in Santo Tomas by spending $30 million.

This is where the confusion comes in. People think that Oroco cannot start spending money and be on its way to 81 percent ownership from the current 57 percent without registration. Yes, it can and it will.

Xochipala Gold is the current owner of Santa Tomas. Therefore, Oroco can start spending money and earning a bigger interest in the project. It is the ownership that determines the earn-in schedule, not the registration. Registration or reregistration have nothing to do with the contractual owner of the property and the earn-in schedule.

So Oroco does not have to wait until registration to raise money to progress the project forward. Actually, the best scenario for Oroco would be if the registration to Xochipala Gold didn’t happen right away because the registration starts the clock on the $18 million option to buy out Rodriquez. Here is what I mean,

Right now, Oroco owns 50 percent of CMR. It also has the option to acquire the other 50 percent of CMR for $18 million.

“An option to acquire the other 50 percent of CMR for US $18 million, payable over three years on payment terms that are heavily back end loaded, with the payment schedule starting after the title registration.

The key phase is – with the payment schedule starting after the title registration. If the registration happens right now, the clock on the option starts ticking. So by having the registration take longer, we can have the cake and eat it too. Oroco can raise money for drilling and start earning interest up to 81 percent of Santo Tomas and at the same time not having the clock starting to tick on the $18 million option.

I am not saying that the registration is going to take years. It will happen soon. But it is a bureaucratic process. There is no risk as to whether it will happen or not. However, it is stupid to think that just because there is no registration, Oroco is stuck.

Oroco is not stuck. The company will raise funds to drill. It will start earning higher interest in Santo Tomas. The registration or reregistration have nothing to do with this. It is just a big confusion among investors and potential investors.

Disclosure: Long Oroco    

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About Mariusz Skonieczny

Mariusz Skonieczny is the founder of Classic Value Investors.