Source: Peter Epstein for Streetwise Reports 12/01/2017
Peter Epstein, founder of Epstein Research, evaluates Centenera Mining Corp.’s Esperanza copper-gold porphyry project.
Centenera Mining Corp. (CT:TSX.V; CTMIF:OTCQX) is a 100% Argentina-focused junior mining company with attractive assets spanning copper (Cu), gold (Au) & lithium (Li), and a cheap valuation.
The most important asset to watch, at least in the short-term, is the Esperanza copper-gold porphyry project (formerly known as the Huachi project, an outcropping Cu-Au porphyry system with a blockbuster discovery hole that had a giant intersection of 353m grading 0.49% Cu Eq, (including 243m at 0.57% Cu Eq and 88m at 0.69% Cu Eq).
The project is located in San Juan province in northwestern Argentina, 135 km north of the city of San Juan. Esperanza is within 35 km of power lines and has year-round road access. It is located at elevations between 2,800m and 3,250m, low relative to other projects in the Andes. Exploration can be conducted year-round.
Centenera has a great management, board & technical team for a company its size {66.6 million shares outstanding x C$0.20 = C$13.3 million market cap}. Drill permits are in hand, and drilling will start the first week of the new year.
The Esperanza drill program will investigate the potential for a bulk-tonnage copper-gold porphyry-style deposit. The company plans to initially drill four drill holes for ~2,000m, stepouts of at least 150m from known holes. Planned holes will aim to reach deeper than historical holes, to 500–600m.
Keith Henderson, president & CEO of Centenera commented in a recent press release,
“Previous drilling advanced the project significantly, demonstrating grade from surface and continuity at depth. The new drill program will investigate the tonnage potential of the deposit with holes planned to test deeper and stepping out approximately 150 metres from previous mineralized intersections.”
Esperanza (fka Huachi) Cu-Au project
In January 2017, Centenera signed a binding Letter of Intent granting it an option to earn a 100% interest (subject to a 2% NSR) in the Esperanza Copper-Gold project. The property consists of a central Cu-Au porphyry deposit and a peripheral epithermal Au system. On March 6, an NI 43-101 Technical Report was published.
Esperanza is in San Juan Province (second highest of nine ranked provinces; Source: Fraser Institute Mining Survey, 2017) in Northwestern Argentina. The project has been known for a long time, but it was only first drilled in 2006.
From 2005-2007, Cardero Resources conducted a modern, systematic exploration campaign focused on the porphyry mineralization. The program consisted of systematic rock sampling, detailed property scale mapping, an IP survey, and drilling (11 holes, 2,552m).
“Exploration programs completed by Cardero Resources from 2005–2007, and Kestrel, 2011–2012, greatly increased the understanding and potential of the property. Cardero’s was the first comprehensive modern exploration with an emphasis on finding and defining a porphyry copper deposit. Cardero was successful in identifying both widespread porphyry copper and low sulphidation epithermal gold style mineralization.” {Source: Page 51 of Huachi Technical Report}
As a rough valuation exercise, one could compare Huachi (now Esperanza) to First Quantum’s Taca Taca project, which was acquired for ~US$0.015 per Measured, Indicated & Inferred Cu Eq resource pound. Current pre-development projects are valued by the market in the range of ~US$0.0025 (a quarter of a penny) to above US$0.05 per pound of Cu Eq in the ground. Since many peers have a primary project with a PEA, PFS or BFS completed, I assumed a per pound value of US$0.0075 for Centenera’s project.
Management is shooting for 500 million metric tonnes (Mt). 500 M Mt x 0.35% Cu Eq (Cu Eq grade adjusted for recoveries and contingencies to be conservative) would be 3.8 billion pounds, worth ~US$29 million (at $0.0075/lb), equal to ~C$0.46 per share. Indicative share prices are based on millions of tonnes of potential resource (from 100 to 900 million along the top of chart) and prospective market valuations (from US$0.0025/lb to US$0.0225/lb).
The yellow-shaded portion of the chart below is a base case range of share price scenarios. The green-shaded portion represents upside scenarios for the company, and/or underlying strength in copper prices. For example, if the Cu price were to trade above US$3.50/lb next year, valuations of peers would likely be higher than they are today.
At 500 million metric tonnes and a realized Cu Eq grade of 0.35%, the value of the Esperanza project alone could be C$0.46 per share in a base case, or above C$1.00 per share in a more bullish case (based on 78.6 M pro forma shares—pro forma for the 12 million unit capital raise). This is forward looking on my part, and my own opinion (not necessarily that of management), the company has no maiden mineral resource yet. One should haircut, i.e., attach a risk factor, to the values on the chart accordingly. As a reminder, the current share price is C$0.20.
To be perfectly clear, delineating 500 million tonnes is far from a sure thing, and won’t come in the maiden resource. However, historical exploration points to targets to be drilled in January that could provide evidence of a scale that attracts considerable attention.
Even after risking the indicative share prices in the chart, I believe Esperanza’s valuation more than covers the entire market cap of the company. If true, that means investors today are getting all of Centenera Mining’s other properties/projects for free.
Readers would benefit from reading the March 2017 Esperanza Technical Report, (not that long or overly technical).
Recent press release: November 20
Corporate presentation Website Twitter
Peter Epstein is the founder of Epstein Research. His background is in company and financial analysis, and he is a Chartered Financial Analyst (CFA). He holds an MBA degree in financial analysis from New York University’s Stern School of Business.