I jumped into CCU last minute (before the SPP cutoff) after seeing a post by nk giving the heads up that this offer was closing soon (thanks again nk :D). After a quick read and look at the share price I decided to make the $560 purchase to get in, with the view to investigate/read a little further before deciding on whether to take the SPP offer.
After spending a little more time researching the company I have decided I will be purchasing the largest stake possible at 6c per share.
Here are some notes (in no particular order) that I have gathered over the last couple of days, from ASX releases, audio presentations, news articles, etc:
- Inferred resource at Wonawinta of 31M ounces of silver
- Expected 5 year mine life, 3.3m/oz per year
- Higher grade resources are close to the surface, which will allow for low cost, open pit mining.
- CCU owns majority interest (70%) in Wonawinta silver project, owned in JV with CBH Resources ***IMPORTANT*** April 22nd saw CCU buy out the CBH claw-back provision, IMHO this is big news and secures CCUs rights to a large percentage of the profits which will come from this project. I’m not sure how it was missed, but this announcement doesn’t seem to have made HC in the CCU forum!
- Projected cash cost per ounce (net of lead credits) were reduced last year from $8.30p/oz to $6.25p/oz
- At current metal prices, the net present value of the project is $60M ****AT CURRENT PRICES***
- Expected $21m cost to start operating for a new processing plant
- Eye Investment Fund own significant (8%) stake in CCU ***IMPORTANT*** EIF also owns 10% of SLR, an explorer gone producer who's share price has recently gone up 400% in 5 months.
- At 6c that gives CCU shareholders the chance to buy in at the Nov/Dec lows. What other silver/gold mining companies still have entry prices at last years lows? Not many!
- 70% of CCU is held by the top 20 shareholders *** In my opinion this is a good sign, although it makes the share price very illiquid. These new shares should add some liquidity once issued.***
- Further exploration opportunities – 70km of strike to explore to north & south of existing site. HUGE exploration potential!
- Production potential by 2011
- Interest in the stock appears to be picking up with stock volumes increasing
- Australian based production would be much safer than some other international silver projects I have read about
Here is an interesting audio interview with the Managing Director Ian Lawrence (Aug 2008): http://www.brr.com.au/event/49122/wonawinta-silver-project-a-pathway-to-production
Finally my thoughts on SILVER: My personal opinion is that we will see gold at a MINIMUM of its inflation adjusted high in 1980 of approximately $2500 within the next 3 years. Currently the Silver/Gold ratio is quite a bit higher than the historical average and if history has told us anything, we will see silver slingshot to a ratio of as low as 15 or 20 to 1 during times of interest in precious metals. But hey let’s go conservative, let’s say it only reaches 25:1. That would give silver a price of approximately $100 per ounce (with gold at $2500). Can you imagine CCU’s profits and share price when it is producing $330M worth of silver annually with a 70% stake in the profits…? The risk/reward with this stock could be very worth the purchase. I mean if things go poorly, yes it could fold, maybe it has trouble securing finance, yes I could lose my $9,600, BUT if things go well I could easily see the profits from this SPP paying off my mortgage within a few years.
I got my SPP Application Form in the post today. I’ll be ticking the box for 160,000 shares. What will you be ticking?
CCU Price at posting:
9.7¢ Sentiment: Buy Disclosure: Held
