NCU's Pumpkin Hollow UG Shaft Headframe, Nevada (Source: DCM via Dundee)

NCU's Pumpkin Hollow UG Shaft Headframe, Nevada (Source: DCM via Dundee)

Dundee Capital Markets cheered Nevada Copper Corp.'s (TSX:NCU) Pumpkin Hollow project in a site visit report published yesterday by analysts Joseph Galucci, MBA and Sean Bracken, B.Eng.

Shaft sinking and above ground infrastructure are underway for Stage 1 of the proposed Nevada, USA mine. The first stage is for an underground operation set to ramp up in Q1 2016, expected to produce roughly 70 million pounds of copper annually with gold and silver credits for 12 years. The underground deposit is open to exploration upside and a $1 million drill program from underground will resume when the shaft is sunk, aiming to increase mine life and grade. Stage 2 of the project is an open pit mine that is currently in the permitting phase.

The shaft is currently 60% sunk (at 1200 ft on its way to 1906ft). Additionally, 45% of engineering has been completed for phase 1, according to Dundee. Shaft sinking is expected to be complete by Q1 2015, which Dundee considers a potential re-rating catalyst.

With Stage 1 on schedule, the Stage 2 open pit operation is pursuing two permitting options simultaneously: Land transfer and Federal Permit. Land transfer requires the Land Bill to pass in the House of Representatives next week before Senate then Presidential approval. Passage of the land bill would enable Nevada Copper to amend their permits in approximately 6 months, Dundee believes. The company is also pursuing a Federal permitting option if the land bill takes too long.

According to Dundee, Nevada Copper trades at a discount and P/Nav of 0.29x, with recent M&A activity in the copper space (Lumina, Augusta and Curis), implying a valuation of $2.38 - $5.78 per share on a P/Nav and EV/lb VeEq basis. They believe NCU's valuation is closest to $4.03 - $5.78/share when compared to Augusta. Shares in the company were trading at $1.96 at press time, showing substantial upside potential.

The company completed a $20 million bridge loan with its largest shareholder on August 26, Pala Investments. They still seek a permanent solution for financing Stage 1 of Pumpkin Hollow, with an estimated total CAPEX of $330 million for Stage 1. They currently have an undrawn US $149 secured loan facility from Red Kite, subject to certain conditions, including the sinking of the shaft.

In summary, NCU is building a mine and has left something on the table for investors willing to assume the permitting, financing and asset concentration risk. With its Pala and Red Kite backing, odds just may be on Nevada Copper's side.

No position in Nevada Copper at this time and always do your own due diligence.