"Your Cu price was very conservative (Copper price US$2.5<$3.0/lb)"
You're right the Cu price from AVB projection was very conservative, but I would prefer projections using a conservative figure for long term. Note that most brokers use a CU price projection in the range of US$2.5<$3.5/lb.
Current Cu price is around US$3.5/lb, but i suspect the low price Cu could entice China to re-stock copper in short term, and we could see Cu price trading above US$4.0/lb range.
LT copper price should be fine as indicated by Goldman Research and other brokers on Copper and Gold: http://www.reuters.com/article/2011/10/04/research-goldman-commodities-idUSL3E7L416920111004
As for AVB, I like to assess on company's projects risks and it's worth comparing with other stocks, so that we could have an idea on the scale and potential developement project risks, in terms of Capex & Opex.
IMO, AVB is a low risk profile with its "starter" project, a high grade (DSO) project with a low Capex while generating strong cash flows to self-fund the main Cu cathode heap-leach SW-EW phase.
I guess we can have a look at MNC (Metminco) scopy study of Mollocas in Chile, Cu leach-SXEW project. If you compare with MNC, AVB have a similar strategy to develop a starter project with low Capex.
IMO MNC has more risks with a very high Capex (+2US$billion Capex) for their Los Calatos project (with low grade Cu)
... Metminco has a portfolio of copper and gold projects in Peru and Chile.
MNC plan to develop first a small and low cost Cu leach-SXEW, Mollocas in Chile. With initial cash flow from Mollocas, MNC could think of their elephant Los Calatos project, a large scale Cu/Mo (exploration for the moment) project with around +2 US$billion Capex.
Mollacas–copper leach SXEW project (MNC's Chilean assets): - Located ~ 500km N of Santiago, tenements 32 km2 - Good access, near infrastructure
- Mollacas is a porphyry deposit, with an supergene enrichment zone.
- Mollacas copper leach project with a JORC compliant resource of 17 million tonnes consisting of Indicated Resources of 7.2 million tonnes at 0.56% copper and Inferred Resources of 9.8 million tonnes at 0.52% copper (at a 0.2% copper cut-off grade);
- In April 2008, SRK Consulting Chile completed a Scoping Study for the Mollacas copper leach project, the key results of which were as follows: * Open pit copper leach operation * Approximately six year life of mine producing 13,500 tonnes per annum of copper cathode (29.8million lbs per annum) * Estimated capital cost: US$56 million * Life of mine strip ratio: 1.3 to 1 * NPV of US$103 million at US$2.50/lb copper and 8% discount rate
So far AVB looks good in term of Cu grade and recent drilling results are encouraging for RIO Verde and with new copper discovery at Serra Verde property:
The new discovery of sulphide copper mineralisation is located approximately 300m southeast of the Pedro Prospect and has retuned excellent results including:
* ASVD-05 10.80m at 1.84% Copper from 100.20m Incl. 3.15m at 5.65% Copper from 107.85m Incl. 0.75m at 18.94% Copper from 108.85m
* ASVD-06 1.00m at 7.28% Copper from 60.00m And 2.53m at 1.38% Copper from 72.07m Incl. 0.93m at 3.26% Copper from 72.07m
* ASVD-03 2.50m at 2.86% Copper from 46.25m
* ASVD-02 4.00m at 1.31% Copper from 72.95m
* Thickest intersects and best grades are recorded in the deepest hole.
* ASVD-05 indicating both grade and thickness increase on the downdip extension. This is extremely interesting and drill testing under this hole is in progress.
* A massive sulphide copper intersect returned 0.75m at 18.94% Cu from ASVD-05, this confirms the area is also prospective for high grade copper mineralisation.
* Copper mineralisation has been recorded in all holes and is further evidence of Pedro being part of a potentially significant iron-oxidecopper-gold (IOCG) system.
* Two rigs have been assigned to Serra Verde for a further ~3,000m of drilling. This will expand the Pedro discovery and evaluate several untested targets1 to the NW defined by strong geochemical and geophysical anomalies.
Currently AVB have 6 rigs on site....
Cheers,
----------------------------------------------- Long-term copper prices to jump by 20 pct: Reuters Poll http://www.reuters.com/video/2011/10/04/long-term-copper-prices-to-jump-by-20-pc?videoId=222248758
Goldman Research : COPPER, GOLD http://www.reuters.com/article/2011/10/04/research-goldman-commodities-idUSL3E7L416920111004
...The bank also lowered its 2012 copper price forecasts to $9,200 a tonne from $10,790, as Goldman economists cut their outlook for 2012 global GDP growth to 3.5 percent from 4.3 percent.
"Escalating concerns about recent macro deterioration and the European sovereign debt problems have led to a sharp sell-off in base metals and in copper in particular," the analysts said in a note.
However, Goldman Sachs sees substantial upside to prices from their current depressed levels and recommended taking long positions in copper.
"The speed and magnitude of the copper sell-off suggests an accumulating short position in the market. Further, a potentially powerful upside catalyst lies ahead in China should policymakers shift to an easier stance and/or should lower prices entice Chinese buyers back into the market."
On the precious metals front, Goldman Sachs saw further upside to gold prices this year and next amid the current low levels of U.S. real interest rates, and kept its 12-month gold price target of $1,860 per ounce.
Copper prices to rally sharply on China demand: Macquarie http://www.reuters.com/video/2011/10/03/copper-prices-to-rally-sharply-on-china?videoId=222200432
Asian appetite for copper stays firm, price to rise: (Codelco) http://www.reuters.com/video/2011/10/04/asian-appetite-for-copper-stays-firm-pri?videoId=222209833
AVB Price at posting:
11.0¢ Sentiment: LT Buy Disclosure: Held
