Sunstone - the boring company

Ok supporting macro first: gold market is bla bla bla, copper market is bla bla bla, trump, kim jung un, tesla, umm debt, bonds, declining grades etc etc etc

Sunstone (approx $48m FD and 8 months of cash) has three relatively robust pillars to build on and they are as follows:

1 - Viscaria. 100% owned, 52mt at 1.2% copper in a mining jurisdiction with existing infrastructure.

According to the updated scoping study numbers partially released in 2016, at $3 copper the NPV/IRR/Payback is A$189M/28%/4years.

Now if we believe the price of copper is going higher, say to $3.50/lb, using my handy abacus I get to NPV/IRR/Payback of A$353M/44%/2.5 years. Just cast your eye at the market cap above again for me please.

The above numbers are only using 18 out of 52mt of global resource and have no credit for the magnetite by-product. Infill drilling will improve economics by potentially connecting some of the ore bodies and we have further possible extensions in multiple zones (as is always a given, everyone always says "its open in multiple directions" but this is really open)

Given all the above, this pillar alone justifies today's multiple of today’s market cap in my view.

Its easy to ignore because all the exciting stuff (drilling) is done but thanks to Viscaria we aren’t facing the prospect of losing money over bad drilling results in Ecuador. Very boring but valuable.

2 - Bramaderos Epithermal Gold prospect (drilling H1 2018) More than solid trenching results to date. Given the “horizontal drill holes” at surface and size of mineralised footprint its not unreasonable to expect a meaningful sized medium to high grade gold deposit from this prospect, my target ranges from 500koz to 2moz depending on depth and grade, still very early stage but the initial drill holes look like they will deliver. Yes, very boring I know.

This prospect is quite handy to have alongside drilling for a porphyry, because its quite a bit cheaper to generate sexy numbers and the story becomes near term addressable cashflow thanks to the epithermal gold along side a longer term bigger capex porphyry deposit.

3 - Bramaderos main (gold/copper porphyry). So the idea here is to define a large low grade but very mineable and simple to process ore body. We are probably looking for something of large size, think 8-15Moz AuEq plus. This is what they call a moonshot, technical success on this prospect would deliver many many bags.

I usually wouldn’t speculate on this type of expensive drilling but given the team involved have done this twice and created value, I will be fine to go along for the ride plus I can’t really see with copper price where it is, how low the share price can go if they miss, could be one of those rare low risk moonshots.

The risk is really that we burn cash for no good results and go back again to try some more. So we will need to hit a few pretty special holes upfront to get the right momentum and balance of dilution vs progress. What is encouraging is team sounds confident of improving on the current best hole of 260m at 0.6g/t and 0.15% cu or roughly 1g/t Aueq. If we could be fortunate enough to hit something >1.5/t Aueq in our first hole we should see a good market response.

These features generally occur in clusters and we have a few other targets on this property that Rohrbach wants to sink his teeth in and seems like will be drilled in H1 2018 as well.

There is also the Finland gold prospect which would have driven any other junior listed in WA past $30m MC alone on the discovery holes.

I have held this since the cap raise last year at 1.5c (was it 1.4?) and hold half the heads in options from when they were being disposed at 0.5c. So obviously in the safe zone and have no right to invite others to take look at it and rate it a buy. However with the move in copper price I figured 3.2c is equivalent to last years 1.5c, so last Friday I bought another 15% at 3.2c with the plan to add another 50% over the next month in the 3.0 - 3.5c range with one eye on the copper price, which is really determining the “risk free floor” on this one or the boredom/terror ratio.

So even if I'm falling asleep, I’ll stick with boring old Malcolm and his team who are 2 for 2 on 1BT porphyry discoveries so far.