DALLAS, TX -- August 8th, 2023 -- Los Andes Copper, LTD (TSXV: LA): Stonegate Capital Partners updates their coverage on Los Andes Copper, LTD. The full report can be accessed by clicking on the following link: Los Andes Copper Q2 Mid Quarter 2023 Report
COMPANY UPDATES
- Important Royalty Agreement Closed: In August Los Andes closed a royalty agreement with Ecora Resources PLC. Ecora is a leading royalty and streaming company focused on investing in future facing commodities, making the Vizcachitas project a logical investment for Ecora. The agreement shows Ecora’s confidence in the project following the impressive PFS report. Terms of the agreement include a $20.0M cash consideration paid to Los Andes in return for royalty payments equal to 0.25% NSR on minerals sold on open pit operations and 0.125% NSR on underground operations. Additionally, the NSR rates are subject to adjustments should production be delayed. Given Ecora’s experience in this market we view the agreement as a positive win-win for both companies.
- Strong Balance Sheet: Following the royalty agreement with Ecora, Los Andes has C$36.0M on its balance sheet. This puts Los Andes in an enviable position, allowing for the potential to optimize production and/or engage in share buybacks. This ability to maintain operations gives us confidence that the Company will be able to avoid negative situations, specifically a position where liquidity issues cause the Company to be a forced seller. Finally, this strong position reinforces Los Andes’ ability to access capital and should be able to utilize it in the future as needed.
- PFS shows robust economics of project: In February of 2023 Los Andes released its Preliminary Feasibility Study (“PFS”) which held very promising results. Most notably the PFS has given investors greater insight into the strong economics of the project. With a mine life of 26 years, the location allows for operations 365 days per year. The PFS has set the proven and probable reserves at 10.9bn lbs. Copper Equivalent (“CuEq”), increased the amount of measured and indicated resources by 16% to 14.8bn lbs. CuEq, and the amount of inferred resources by 130% to 15.4bn lbs. CuEq. This results in a post-tax NPV of $2.8bn assuming a copper price of $3.68 per pound and a discount rate of 8%. The payback period is estimated at 2.5 years after initial production.
- Project highlights: Los Andes is the full owner of the Vizcachitas copper project, which is one of the largest undeveloped copper projects in South America. The project is situated within Chile’s prolific Central Copper Belt which hosts a number of Tier 1 copper projects. Vizcachitas is strategically located to be sold to a mining major should the Company choose this route. Aiding this optionality is the mentioned 100% ownership of the project making any sales easier to navigate as well as the large size of the project making it enticing to majors.
- Valuation: The Company is currently trading at an EV/NPV of .14x vs average comps of .36x. Due to the advanced stage of the deposit, significantly larger resource deposit, enticing potential as a takeover candidate from a major, and the positive results from the PFS we believe the company deserves to trade at a premium, applying a multiple range of .35x to .45x with a midpoint of .40x. This results in a valuation range of C$40.14 to C$51.30 with a midpoint of C$45.72. This brings the Company more in-line with the other large projects that have also completed the PFS stage.
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Stonegate Capital Partners is a leading capital markets advisory firm providing investor relations, equity research, and institutional investor outreach services for public companies. Our affiliate, Stonegate Capital Markets (member FINRA) provides a full spectrum of investment banking, equity research and capital raising for public and private companies.
