copper to surge on 'mammoth demand' -, page-19

MNC is a Mammoth copper play for 2011.

An exciting year in store as a fully-funded Metminco embarks on an ambitious drilling programme
Wednesday, December 15, 2010 by Ian Lyall

An exciting year in store as a fully-funded Metminco embarks on an ambitious drilling programme
Wednesday, December 15, 2010 by Ian Lyall The company's Los Calatos copper project is in Peru. Etheridge says it may end up in the hands of a mining major
As announcements go it was fairly low key. But for Metminco (LON:MNC, ASX:MNC) the regulatory news release of December 6 heralded a new and exciting phase in the companys development.
It stated that the dual listed group had successfully concluded a A$30 million fundraising, while formally taking full control of a little known company called Hampton Mining Limited.
Not in and of itself particularly earth shattering news. Only if you knew the back-story would you realise the statement represents the culmination of two years of hard work.
More than that, it gives the green light to what is expected to be both an ambitious and aggressive drilling campaign.
Metminco is now fully funded for the next year at least, and by acquiring Hampton has control of its major asset a potentially world class copper project in Peru.
There is some more house-keeping to be done to acquire full ownership of two further assets, both in Chile, which could add further value to the Metminco share price.
But as we will see later they are not pivotal to the success of the company. In fact they are two or three hidden treasures that could morph into exciting projects a year to 18 months down the road.
However this is a long way in the future. The first and most pressing task is drilling that copper target in Peru, a project called Los Calatos, says director Bill Etheridge.
Before we talk about it in detail it is worth understanding some of the back-history of Metminco. The story started in 2006 when Hampton agreed a deal to buy into the Mollacas, Vallecillo and Loica licences in Chile.
The cornerstone investors in Hampton included William Howe (founder of Hampton and now managing director of Metminco), Etheridge and other Sydney-based investors.
Australian junior miner Takoradi was another cornerstone investor, and in 2008 the Chilean firm Junior Investments injected US$20 million into Hampton.
However the process of taking the company public using Metminco as the vehicle became rather tortuous, taking two years to conclude.
It wasn't helped by the state of the equity market, which made it impossible to raise cash just when new funds were needed.

The complications were the crash in 2008 and our corporate structure,Etheridge told Proactive Investors.
A couple of big shareholders (Takoradi and Junior) wouldn't accept the Metminco bid in late 08.
Thus it has taken us a while to list 100% of the Hampton assets inside Metminco. It has taken us two years to achieve that.
Inspired business in 2007 brought an agreement to purchase the aforementioned Los Calatos, and also a speculative gold play in Chile called Camaron.
Of the A$30 million it raised this week the majority will go into a drilling campaign at Calatos that already has 926 million tonne resource at 0.37 percent copper and 0.027 percent molybdenum (or 0.51% copper equivalent), containing over 4.5 million tonnes copper equivalent.
Around A$10 million is being earmarked for a 50,000 metre programme, which it is hoped will at least double the size of Calatos, likely to be followed by a second round of the same order of magnitude.
The company has drilled 21,000 metres and Etheridge believes the team on the ground has only drilled only a small proportion of the total target porphyry system.
The project occurs in a major copper porphyry belt in far south Peru.
It is located in desert, near the coast (around only 70 kilometres inland) and near power and water, so it is very well located for possible development.
The tenements total 214 square kilometres and are home to a large copper porphyry cluster, with at least eight different exploration targets identified by surface mapping and geochemical sampling.
And it is in an incredible neighbourhood geologically with three major copper mines in the vicinity - Cerro Verde, Cuajone and Toquepala.
"Los Calatos may finish in the hands of a major", Etheridge says candidly. ?It could grow into a multi-billion dollar, 50 million tonne a year open pit the sort of mine built by the majors.
Basically majors need projects of a certain size. If a project reaches that size then the P/E multiples applying to majors usually make it attractive for them to acquire juniors with major undeveloped Cu deposits. It is simple value arithmetic.
Most of Metminco?'s current valuation is accounted for by Los Calatos. But there is a lot more besides this monster project.
A potential fire-cracker is Camaron, the company's gold property in Chile.
The company has collated some very good sampling results from Camaron, but hasn't until now had the funds to drill the area.
It does now and will spend around A$1 million starting next year on a modest programme.
"If we double the resources at Los Calatos at a similar grade then you are going to add a lot of value" Etheridge says.
"Camaron, which the market knows little about and cares even less, is in the price for nothing fairly much.
But if we get serious gold results then that is also going to add value" That is a sleeper.
It is much more speculative than Los Calatos. But it is a very big system that has never been drilled. There is the possibility of copper, a little bit of moly and it is almost certainly another porphyry system.
"The Camaron gold anomaly is big enough and if you get economic grades, then it could be a very big deposit".
This takes us to the little piece of house-keeping that needs to be done in tidying up ownership of Mollacas and Vallecillo, two copper-gold projects in Chile.
The latter has a lot of potential with a resource of more than 700,000 ounces of gold equivalent and seven untested exploration targets: four polymetallic, two comprising a copper-gold porphyry, and one gold.

However, the company's partner in both projects, Chilean company MN, isn't in a ready position to contribute financially.
So we need to address the issue of ownership of these assets,Etheridge says.

"But no mistake these are likely to be valuable assets and their time will come. Both are likely to become mines, and mines that Metminco could develop."

The news-flow will come thick and fast next year as Metminco cranks up the rigs and starts drilling in earnest.

First results from the Calatos drilling programme should begin to feed through by the end of January.

"Then it will be more or less constant," says Etheridge.

"It may not be before August or September 2011 that we announce revised resources for Los Calatos. That should be a big news event.
"We would hope to start drilling Camaron at some point in the first quarter of next year. So you might be getting results from Camaron in April or May."