Marengo Moves Ever Closer To Becoming A World-Class Copper Miner, Supported By George Soros And An Army Of Loyal Retail Investors By Our Man in Oz
Three months ago, eye-brows were raised in the mining world when Minesite suggested in a story from its Man in Oz that parallels could be drawn between the fabulously successful Equinox Minerals and a new player on the copper block, Marengo Mining. It was, admittedly, a comparison which used a degree of journalistic licence, given the disparities between the two. Equinox, at the time was valued on the stock market at close to A$4 billion. Marengo was closer to A$40 million, a 100-fold factor of difference. Equinox was delivering fat profits from its Lumwana mine in the southern African country of Zambia. Marengo was still exploring its Yandera project in the Pacific Island nation of Papua New Guinea. But, as was pointed out in that August 19th report, the differences may only amount to matters of timing, because a few years ago Equinox too was a tiddler, before it grew. And that?s just what Marengo is doing too, with gusto. And anyone who took note of that somewhat cheeky comparison between minnow-Marengo and Mid-Tier star Equinox would today be wearing a very board smile. Since the similarity was pointed out, the share price of Equinox has risen 13 per cent, from A$5.16 to A$5.84. Marengo, by contrast, is up 173 per cent, from A9.5 cents to A26 cents. Both have been even higher recently, but the upward move in Marengo?s share price is an event which seems to have slipped beneath the radar of most institutional investors, leaving the field to private punters, who have been doing rather well out of Marengo. If they?re patient they should do even better, because the flow of good news from the company has only just begun.
That?s one reason why last week?s annual meeting of Marengo shareholders filled the upstairs room in the Celtic Club, a prominent, and very Irish, drinking club in Australia?s premier mining city, Perth. The star attraction at the event was to be a presentation from Marengo?s chief executive, Les Emery, the man who has done most - alongside his chairman, John Horan - to create the business which is shaping as the world?s next significant copper producer. The only problem with that plan was that John had to fly across from Adelaide (?I always do my best work at 30,000 feet and after a few glasses of decent red?), and Les had suffered one of those horrible long hauls from London to Perth, and arrived bleary-eyed and in obvious need of the medicine recommended by his chairman.
Jet-lag, however, was never going to be a problem for the Marengo investors who made it to the club that afternoon. They would have even forgiven Les if he had nodded off while John took the audience through the boring box-ticking of the annual meeting process. Missing out on the cold beer and the fried food were the institutional investors who have so far assiduously avoided loading up their portfolios with shares in a company which has proved good enough for the Great Speculator himself, George Soros; which has recently stitched up design, construction and a partial funding agreement with a Chinese partner; which is within weeks of finalising a definitive feasibility study into the Yandera starter mine; and which just keeps proving up more, and more, copper.
Tick those points off. More copper. A project in the starting blocks. A fat-cat investor high up on the share register. A Chinese partner with engineering and procurement skills and a direct line into the Peoples Number One Bank in Beijing. And a strong copper price. Little wonder that over the past three months the share price of Marengo has risen by so much, and that the market capitalisation of the company is closing on A$200 million. At that level, it?s beginning to reach a point where the institutional investors can no longer afford to ignore it. And that, for astute investors, represents the likely trigger point for the next re-rating of Marengo - the advent of the institutions. Then comes the detail in the definitive feasibility. Then comes financing, firm timetables, and construction. Taken at it broadest, this is a night-follows-day exercise and even if Marengo has a few years to go before it can claim equal status with Equinox, it is on the way.
Consider some of the numbers. Yandera is 100 per cent owned by Marengo. It already has a proven resource of 4.9 billion pounds of copper and 176 million pounds of molybdenum, plus associated gold, silver and rhenium credits. The initial plan is to develop a mine processing 25 million tonnes of ore a year, a rate which will be expandable to 50 million tonnes, which is about what Equinox?s Lumwana does too. The proposed production start-up is late 2013-to early-2014, with the capital cost of the development likely to be in the order of US$1.6 billion. Financial details will come with the release of the definitive feasibility, but it?s worth noting at the outset that when the study started copper was selling for around US$1.00 a pound. The current price is around US$3.80 per pound.
If Yandera as a project-in-waiting is not sufficient to get a casual observer interested in Marengo, then there is the exploration aspect to consider too. Not content with having a series of hilltop orebodies which should be simple to mine - if that?s what you call cutting the top off a hill - Marengo has opted to test the depths of the structures at Imbruminda and Gremi, the first two of the big porphyry orebodies it will open up. Four ultra-deep holes have been bored into the mineralised zones, with the first hole in Gremi producing an assay of 0.48% copper over a 660 metre intersection, including a high-grade assay at depth which showed 1.06% copper over 50 metres. Meanwhile, the Imbruminda deep hole featured 207 metres at 0.63% copper and two deep zones, one of 72 metres at 0.96% copper and another of 30 metres at 1.19% copper.
Assays are pending from the final two deep holes, but when they come in investors will get a better understanding of the size of the monster mine being planned by a company which was, until recently, a minnow. By the end of the year, when Marengo is fully loaded with the deep assays, and the definitive feasibility, and the memorandum of understanding with the engineering and construction arm of China Nonferrous Metals, institutions will surely be wondering why they held off for so long. After all, Marengo is in the right commodity, in the right location, and has the right development partners ? something Minesite readers will have picked up on months, if not years ago.
