When Nevada Copper (NCU.TO) finally moved up after trading around the C$1.30 mark last winter, we never thought we would see these levels back. Just seven months after our initial report we are trading at exactly the same level as back then, and this year’s share price has been a real rollercoaster as the share price has more than doubled since our report, only to lose half of its value again in just three months time. Is this drop warranted? We don’t think so.
So what happened in the past half year? The shaft sinking at the Phase One of the Pumpkin Hollow Project is still going according to plan, and the company was able to get access to additional liquidity as its main shareholder provided a bridge loan facility. On top of that, the House of Representatives in the USA has unanimously (!) approved the land change bill which will shorten the permitting process for the Second Phase of Pumpkin Hollow by several years. We expect this bill to be approved in the senate and signed by President Obama within the next few months.
Additionally, the copper price hasn’t been really working against the company, as the spot price is still above $3/lbs which should provide a healthy operating margin on both phases of the project. The market seems to be betting against the company’s ability to secure the remaining part of the financing for Phase One of the Pumpkin Hollow project, but as the management team of the company owns in excess of 10% of the outstanding shares, we have little doubt they will do the best they can to get the underground mine in production as soon as possible. The total NPV of the project is in excess of $1B, and Nevada copper is currently trading at a discount of more than 90% to that Net Present Value. We expect the company to bounce again around these levels, and are adding to our position.
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Disclosure: The author holds a long position in Nevada Copper and will add more shares shortly. Please see our disclaimer for current positions.
