the little guy that no one else is buying...."
The latest rising star in LatAm junior miners is Global Copper (GLQ.to). This is totally understandable, as it's got a lot of positives for shareholders.
1) Working in Chile, one of the best places in the world (politically and economically speaking) to hold a copper deposit.
2) Proving up the very large Relincho deposit. There is already over 13Bn Lbs copper equivalent (including the moly on site) as a resource, and thanks to the ongoing drill results that resource is likely to get bigger still. On a pounds-in-the-ground basis, we're looking at approx 2.8c/lb Cu Eq with more copper resource to be identified, which means there's PPS upside left in the tank (have a look at the recent post on Candente Resources (DNT.to) for a bit more info about the way that calculation works).
3) A top quality management team that's led by Ross Beaty. This dude has a proven track record of taking a junior, proving it up and selling it to the highest bidder later, on the way adding significant shareholder value. A really smart model; he took Lumina Copper and split it into four pieces. The first three chunks are now sold (Lumina Resources, Regalito Copper, Northern Peru Copper), and GLQ is the last of the bunch. Will it be sold? The answer is "yes", the only doubts are "when" and "how much". Personally, I reckon it goes before the end of FY08, but hey....that's just me.
4) A low total share dilution. Right now the number stands at approx 33m fully diluted, which is very low considering they have a goodly amount of working capital at bank, too. The total share count is unlikely to top 40m before the project is bought out.
As always, there's a whole heap of info you need to check on as part of your own DD* that's not included in this post, and the best place to start is the company website, right here. Meanwhile, GLQ has really flown since its sister project Northern Peru Copper was sold back in December, as this price chart shows:
So with the cat somewhat out of the bag at GLQ, what the canny investor should do is look around for a cheaper way to play the same sector. The answer, I think, could be Los Andes Copper (LA.v), which is still way under the radar of most investors and offers great value. Here's why:
1) LA.v is also in Chile. In fact, the company bought its Vizcachitas project from Global Copper last year, a deal that suited both sides. LA.v got a quality greenfield project, and GLQ got U$10.4m in cash to use on developing its main Relincho project (as well as 13% of LA.v shares).
2) Vizcachitas is also big (though not quite in the same mega-league as Relincho, for sure). Right now the 43-101 compliant measured, indicate and inferred resource is 4.5Bn Lbs copper equivalent (this according to my personal calculations, with moly again the credit product) . It's also turning in good drilling results, with an April 2nd press release that was very interesting, cos it showed nice grades in a step-out drill hole, thus promising that the current resource will get bigger still.
3) Here are some basic numbers and calculations, in the same style as used for GLQ above:
Shares out: 78.6m
Shares fully diluted: 95.1m
Share price: C$0.53
Market Cap: C$41.7m
Now there are more shares out for sure, and the resource isn't as big as at Relincho, BUT if you do the same "pounds in the ground" calculation, LA.v has copper priced at just 1.1c/lb copper Eq., and that's a big difference to the GLQ in situ price. Remember, the resource at Vizcachitas looks like getting bigger, too.
4) The management team, though maybe not quite as rockstar as GLQ, is full of quality. Topping the bill at LA.v is German dude Klaus Zeitler, who was a big guy in Teck Cominco for years, then went on to start up the very successful Amerigo Resources (ARG.to, a company with one of the smartest mining business models I've seen in years. Have a look a ARG.to to see what it does with Codelco tailings...very clever guy, that Zeitler).
5) Here's a chart showing the 12 month share price performance.
Not as sparkling as GLQ, I'm sure you'll agree. However, that doesn't mean this is a bad company, it means it's an undiscovered company. Big difference, saltamontes.
6) Finally, it's always a little bit apples-to-oranges to compare one project to another. The potential investor needs to be happy about the company that they're investing in because of what it is, and not simply because it compares well to another company. This is important, and an essential part of your own DD** because there are always variables.
Two examples of many; away from simple copper resource number LA.v has a significant advantage with water rights. While the area where GLQ's Relincho is dry as a bone, LA.v has already secured partial water rights For Vizcachatas. That's not a minor issue in Chile, people. On the other hand, there is a small but important part of Vizcachitas to which LA.v only holds majority ownership (not 100%), so to add value and avoid any issues in the future it'd be nice to see LA.v get 100% control of every square metre on site (although it's by no means essential, I hasten to add).
Finally, my disclosure. I like both GLQ and LA and have both of these companies in my portfolio. I've also recommended them to private clients on several occasions. The difference is that at current prices there's not much temptation to add to GLQ, but LA.v is still wonderfully cheap and I'm looking to add (depending on my own personal cash flow). For more information, check out the LA.v website, linked right here.
Keep it clear that these companies are speculative plays by nature, and if you start going overboard and betting the farm on LA.v, GLQ.to or any company like them, you could score a massive slam dunk or you could end up losing a lot of money. You are the master of your own destiny.
* ALWAYS do your own DD before investing in anything. Remember you got to read this note for free. Think about that.
** I'm really not joking, ok dude?