We would like to draw your attention to Oracle Mining (OMN.TO), a near-term copper producer in Arizona, USA.
Oracle Mining expects to release their bankable Feasibility Study (BFS) in Q1 2013, after which they’ll probably execute their LOI with Credit Suisse who’ll provide up to $70M in debt financing to start the construction of the project.
The past-producing Oracle Ridge copper mine has a historical resource estimate of 8Mtonnes at 2.33%Cu for a total copper content of approximately 400M lbs. Oracle Mining has recently completed a 61-hole drill program to confirm and expand this historical estimate. We expect the company to announce a NI43 compliant resource estimate within a month from now. From the drill results released to date, we would expect the resource to be similar to historical, with potential for more due to in-fill drilling and new zones that have been announced. As 60% of the property remains unexplored, it’s not unthinkable Oracle Mining has in excess of one billion pounds of copper M+I.
We expect the BFS to be based on a 2000tpd mill scenario, for an annual production of 25-30Mlbs of copper at an all-in cash cost of $1.4/lbs. At our long-term scenario with a copper price of $3/lbs, annual cash flow should come in between $38-45M per year. In a more optimistic scenario based on a price of $3.75/lbs copper, annual cash flow will be between $58-70M per year.
At a shareprice of C$0.75, Oracle’s Enterprise Value is only C$23.5M, which makes it an attractive investment if the BFS doesn’t contain negative surprises. As Oracle expects to start commissioning in December 2013, we are hopeful the company will generate cash within 15 months from now.
Disclosure: The author holds a long position in Oracle Mining Corp. Please see our disclaimer for current positions.
