Barry and the team got Nifty, Maroochydore and Paterson for 3 cents/lb at a time when no-one else wanted it. It’s worth noting that replacement value of the assets acquired is around $300mil. Shareholders have all this plus Nanadie plus the IP…..this has all the attributes of a tech stock as the IP is the key to success to convert their established resource at Nifty into copper plate. Then there’s the exploration side to excite the market.
Reading Finders Resources website and ASX anns offers an insight into what Barry and his team experienced in Indonesia, not only getting the chemistry right for successful leaching but they also had a front row seat of corporate shenanigans.
Here’s a snippet of some anns…..the mind fair boggles at the learnings and experience gained at Wetar. The improvements made was evident then bang!, it was taken away from them.
Finders resources Website Operations “The ore bodies comprise metal-rich volcanogenic massive sulphide and barite deposits. The massive sulphide deposits are dominated by pyrite, with minor chalcopyrite, covellite, chalcocite, tennantite-tetrahedrite, enargite and bornite…..Finders has been operating sulphide heap leach and SX-EW copper cathode demonstration plant on Wetar Island since 2009…..By late 2016 the (new) plant was operating around nameplate capacity.”
Finders resources Website Project Description “The predominant secondary copper mineral is covellite at Kali Kuning. The Lerokis orebody contains mainly covellite and chalcopyrite.
Finders Res Annual Financial Statements December 2018 Director’s comments “Leaching of a sulphide orebody is a unique process. While considerable effort was made during feasibility studies to understand the best method to leach this type of orebody, the Company’s understanding has evolved and a number of operating improvements have been implemented including the installation of additional aeration capacity and better controls over irrigation rates”
Finders Res Annual Report December 2018 Chairman’s comments “high acid levels in leached solution reduced the copper extraction efficiency in the SX-EW plant from a target rate of 80% to under 50%.”
Finders Res 2018 Half Year Results (dated Sep-18) “Free acid levels impact SX efficiency and result in lower copper tonnes stripped…..original aeration insufficient and upgraded during heap re-mining…..zinc and iron rich minerals often encapsulate copper and slow copper leaching…..re-mining lifts high grade, poorly leached material from deeper in the pad to closer to the surface…..while improved aeration has improved copper leaching, it has also increased acid generation…..high free acid lowers the solvent SX efficiency.”
I like looking at the odds of success of certain events, risk versus reward. Let’s base these odds on a margin of US$1.00/lb which is pretty conservative - earnings (NPAT) ~$50mil on a PE between 10 and 15 = m/c of $625mil compared with m/c of $90mil – that’s Nifty only!
Let’s look at only two things, the chances of success with the leaching process and the copper market. Let’s rattle Barry’s cage a bit and give him an 80% chance of cracking the metallurgy but not without issues, and resultant cost blow outs, so reduce it to 70% - say the chances of total capitulation of the copper market is 10% (wave goodbye to electrification and greening of the planet) so that’s a 90% chance of things going OK - so these two main events which CYM’s fortunes rely upon equates to roughly a 6 in 10 chance of success for Nifty only.
This method of calculation makes a back of an envelope look sophisticated, bugger NPV’s, this is hugely conservative and it’s bringing odds of success into the equation but what’s undeniable is no matter how you put any figures together, when Barry and the team convince the market they’ve cracked the metallurgy (in production? pilot plant? column tests?) then the share price is in for one helluva re-rate - a minimum of 7 times as calculated above. Maybe even 15 or up to 20 times based on PE’s ascribed to other producers / explorers because what will happen when the market is convinced of CYM’s future is that other projects will immediately see some value from the market. It’s arguable the market has ascribed no value at all for Maroochy, Paterson and Nanadie currently.
So you put your money up and it might halve if there’s ongoing issues but weigh this up against a potential payday of 15 times over the next couple of years…..Is Baz and the team and their IP worth a punt?
With their experiences and learnings in Indonesia I’d say so.
(20min delay)