NCU headframe

Nevada Copper headframe (Image: Nevada Copper)

Nevada Copper (NCU.T) has received the Yerington Land Bill from the US Senate and House of Representatives. The land bill means that one more hurtle has been cleared as the Pumpkin Hollow project moves toward production. The project is one of the few copper projects worldwide that has a clear path to production.

The Pumpkin Hollow project hosts 5.22 billion pounds of copper, 989,265 ounces of gold, and 32.91 million ounces of silver in mining friendly Nevada. The goal is to be in production in the first quarter of 2016 with a two phased development approach.

Phase 1 will be an underground mine processing 6500 tonnes per day for a 12 year mine life. Economics on Phase 1 are impressive with a 20.9% after tax IRR at $2.75 copper. The project also has a relatively low CAPEX of $329 million. The grade of the underground deposit is 1.71% copper equivalent.

All permits have been received for stage 1 and construction is underway with the shaft currently 80% complete.

Phase 2 of the project is a 70,000 tpd open pit mine will a 22 year mine life and permits are expected in 2015. Phase 2 also shows attractive economics with an IRR of 17.4% at $2.75 copper but a much higher CAPEX of $926.6 million.

Giulio T. Bonifacio, president and chief executive officer, stated: "We are extremely pleased with the passage of the bill as it will enable Nevada Copper to advance the much larger stage 2 open-pit project on an accelerated basis."

NCU1yrchart

Nevada Copper is set up for a busy 2015 with catalysts including;

  • Acquiring federal lands from the Bureau of Land Management (next 6 months)
  • An optimized feasibility study on phase 2 (Q1 2015)
  • Completion of production shaft to haulage level (Q1 2015)
  • Permits for Phase 2 (Q2 2015)
  • Additional drilling results (Q1-Q4 2015)

It is hard to find copper projects that are this large and significantly de-risked which make NCU a stock worth watching.

Nevada Copper could also be seen as an attractive M&A target for a larger copper producer. Augusta Resources held a similar project (size/permitting timeline) in Arizona that was taken out by Hudbay Minerals (HBM.T) for between 10-12 cents per pound of copper in the ground. As a comparison, NCU is trading for roughly 3 cents per pound on a reserve basis.

We have heard rumours that Russian investment group Pala is looking to divest from its interest in Nevada Copper. These are unconfirmed rumours, which Nevada Copper itself denies. We checked insider filings and Pala holds 40.2 million share (50% of the outstanding shares).

Symbol: NCU.T
Share price: $1.45
Shares outstanding: 80.5 M
Market cap: 115 M

Read: U.S. Senate and House of Representatives Pass Land Bill or CEO Interview on BNN - September 17, 2014.

I have no position in any of the stocks mentioned. This is not investment advice. As always please do your own due diligence.