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7/16/08

Los Andes Copper (LA.v) today just about sums up the whole junior sector

If any story sums up the mood in the junior mining world at the moment, it's that of Los Andes Copper (LA.v). It released very bullish news today and was "rewarded" by a 10% sell-off in its stock that made me roll my eyes and laugh at the moon.

LA.v 1 day chart

LA.v is busy working on its Vizcachitas project in Chile, and today published this PR (go see) which was very positive stuff for the company. The headline info from the PR is that Vizcachitas now boasts an 43-101 compliant indicated resource of 515MT at 0.39% copper and 0.011% molybdenum, as well as a 523MT inferred resource grading 0.34% copper and 0.012% moly (all at a 0.3% Cu cutoff). So what's that mean in English, Otto? Here we go with some numbers to explain what kind of contained resources we're talking here:

The Indicated Resource (ie a pretty reliable number)
515MT @ 0.39% Cu & 0.011% Mo = 4.43 billion lbs copper and 125 million lbs moly

The Inferred Resource (ie needs more work to turn it into an indicated, but geologists aren't stupid and can read rocks)
523MT @ 0.34% Cu & 0.012% Mo = 4.29 billion lbs copper and 151 million lbs moly

So add 'em all up and we're talking over 10 billion lbs Cu Eq at Vizcachitas (copper equivalent, assuming 1lb Mo is worth 8lbs Cu).

Now, as always there's a hundred ways of cutting and slicing a 43-101 compliant resource report like this one, but let's aim for the blue sky and assume that the 10Bn lbs Cu Eq which includes inferred numbers turns out to be (after more proving up work) the final reserve number at Vizcachitas. Now let's have a look at the company stats
  • Shares out: 78.6m
  • Shares fully diluted 95m
  • Current share price $0.45
  • Market Cap $35.37m
Or in other words, a company worth $35m is sitting on 10 billion pounds of copper. This allows us to do the in situ calculation, and once you do the crunchin' we get each Lb of copper under the ground at Vizcachitas being currently valued at 0.32 cents per pound. Yeah that's right. You sell copper at U$3.80/lb at market, but this copper is marked at one cent for 3lbs. Starting to smell the possible upside?

Of course the copper under the ground at Vizcachitas isn't worth $3.80/lb right now, but if we consider that the latest copper junior buyouts (NOC.to, TYS.v, CUP, GLQ.to) all happened in a range of between 2c and 3c in situ copper, there's plenty of recent precedent to suppose LA.v has a 6X to 10X potential upside. This puts today's sell-off into perspective. Market conditions must be pretty dire to warrant a performance such as that at LA.v today, because less than a year ago this stock would would shot 20% or even 30% higher on news like this.

LA.v 1 year chart

There's plenty of other things to like about this project, too. For one thing it's in Chile, which is about the safest pol risk down here (well, I should say perceived pol risk, but that's another story). For another, it already has partial water rights and has found plenty of underground water besides that...water is a precious commodity in Chile. For another the access is relatively good, and power supply shouldn't pose much of a problem. Management is good and has a proven track record (LA.v's main man is the guy behind the ARG.to success). I could go on, but all I'm trying to whack you over the head with here is "it's cheap", ok?

I'm going to put together a post on the more general aspect of the market for juniors later tonight, but to wrap this post up here's the link to the LA.v website. Go do some DD, dude. This thing is cheap and as long as you possess the necessary patience, buying now is the smart move. It won't stay cheap forever.

Disclosure: part of my long term portfolio