Chieftain Metals (CFB.TO) announced they received all permits necessary to start construction works at their Tulsuequah Chief project in British Columbia, Canada.
We normally don’t bother writing about companies with an IRR lower than 20%, but the Tulsuequah Chief project is an exception as Chieftain will produce in excess of 60 million pounds of zinc per year. As we are expecting a bump in the zinc prices from 2016 on and Tulsuequah Chief is expected to start commercial production by the end of 2015, Chieftain Metals might be an interesting company to bet on the future zinc price.
The BFS outlined a capex of $440M and an after-tax NPV7% of $175M for an after-tax IRR of 15%. As the company used aggressive pricing for copper ($3.66/lbs) and silver ($28/oz), the IRR will be much lower than the current 15%. This company should only be considered in case you expect a jump in the zinc price of at least 50 to 60%, as we aren’t too excited about the returns in the ‘base case’ scenario.
Disclosure: The author holds no position. Please see our disclaimer for current positions.
