Oroco Acquires Interest in Santo Tomas Copper

by | Feb 23, 2018 | Carousel, General, Investment Ideas | 0 comments

This article has been written by Caliche from Calichebahada.com.

Many will have noticed I have not put out any original commentary for a long time. The truth is during the market downturn there was really not much to say. That has all changed as of the announcement from Oroco Resources OCO.v earlier today.

While the announcement of the Santo Tomas properties acquisition may come as a surprise to many, that a company with a market cap of only 10 million dollars could negotiate an interest in a billion ton copper deposit, I assure you to management it is not.

Oroco Resources has been working for years to secure rights and unravel a legal quagmire that has held the property off the market for decades. The process appears to be coming to an end with an exciting outcome for Oroco, a mining micro cap that is looking to capitalize on years of hard work. There are few projects available of this scale and advanced nature to global majors, never-mind a junior with a discovery and successful sale of a single gold asset under its belt.

Santo Tomas was discovered in the late 1960’s and worked on up until the 90’s. The non-compliant global resource stands at a billion tons of about .4% copper including gold, silver and molybdenum credits. Contained copper metal is in the ballpark of 8.5 billion pounds! The deposit is divided into a north and south zone and is open to depth and laterally.

Exall, a previous operator commissioned a study by Bateman that concluded:

The study — carried out by Bateman Engineering, Mintec and Mountain States R & D — envisions a 60,000-tonne-per-day operation that would produce, on an annual basis, 306 million lb. copper, 69,000 oz. gold and 2.3 million oz. silver.

(That’s over 1.1 billion dollars per year at today’s prices and enough copper for 1.7 million Teslas )

Minable reserves in the North Area, using a 0.2% copper cutoff, are calculated to be 428.8 million tonnes grading 0.368% copper, 0.057 grams gold and 1.87 grams silver per tonne. The stripping ratio is estimated at 1.4-to-1 and production costs (including smelting and refining charges) are projected to be US66 cents per lb. Additional reserves of 567.7 million tonnes grading 0.405% copper are present in the South Area deposit.

The news of today indicates a 77.5% ownership in the surrounding prospective properties. A 77.5% ownership in Papago pending registration, which could come any day and a 20% interest in Altamura copper (negotiating for majority interest) which, holds the main deposit.

I have compiled the map below, which is an overlay of the OCO map contained in the news of today and a deposit outline from a report of a neighboring property. It appears the Papago property holds 20 to 30% of the mineralization! That, with the 20% interest in Altamura gives Oroco a massive foothold in the Santo Tomas deposit. Assuming 8.5 billion pounds Cu metal, Papago at 77.5% of 25% of the deposit and 20% of the main deposit through Altamura, Oroco today controls 3.35 billion pounds of copper!

 

 

 

What could this mean for Oroco’s share price given 3.35 billion pounds of copper? Transaction prices for pounds in the ground varied from about 4 cents to more than 10 cents last cycle. A low estimate of 5 cents per pound result in some fantastic valuations for OCO. 3.35bn pounds times 5 cents divided by 78 million shares gives 2.14 USD!

Valuations on deposits of this scale will do nothing but go up in a period of high copper prices and rising demand. Automakers are adopting a much more aggressive timeline for the rollout of hybrid and full EV’s than the most bullish of analysts had predicted. The coming clean energy revolution also increases demand for copper. Conventional power requires about 1 ton of copper per megawatt. Wind generation requires 4 tons per megawatt.

The news of today is absolutely massive, for a micro cap to secure a foothold in a multi-billion dollar deposit is unheard of. It appears there are some hurdles to clear but for Oroco to make the disclosure they did today there must be a great likelihood of them completing the task at hand and securing a majority stake in one of the few remaining billion ton porphyry deposits in North America. Once these transactions are complete there will be no shortage of buyers wanting to secure copper output for decades to come!

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About Mariusz Skonieczny

Mariusz Skonieczny is the founder of Classic Value Investors.