Very High Grade Copper Discovery
Silver Stock Report
by Jason Hommel, May 31, 2006
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This January, a copper explorer's drill hit 19% copper over 64 feet, including 41% copper over 27 feet. Later, on Feb. 15th, they announced 41% copper over 27 feet, and within that, 60% copper over 13.5 feet. Those are definitely minable widths! 40% copper is 881 pounds/tonne, which, at $3.65/lb., is worth $3,200/tonne! Typically, rock worth about $200/tonne is considered high grade, and very profitable, for an underground mine.
Fully Diluted Shares 7,480,324
+ 400,000 options for management at $1.99/share
+ 1,000,000 shares to buy the property
+ 4,168,000 shares in the oversubscribed & closed $3.3 million private placement.
Total: 13 million shares fully diluted
@ $3.20/share Cdn x .91 = $2.91 U.S.
$38 million market cap.
For the name of this copper stock, please sign up to "look at my portfolio" at silverstockreport.com (click on the customer service link at the top).
This discovery is almost too good to be true, but there were other newsletter writers that picked up on it, and another company immediately staked ground nearby within 24 hours. As I was buying this stock recently, company insiders were also buying as much as they could in a recent private placement at $1.44/share and $1.72/share.
As a silver stock investor, having looked over hundreds of opportunities, I can honestly say this is among the best mining opportunities of which I know--and it's also located in Montana, which is now supportive of mining again.
For comparison, Minera Andes hit "high grade copper" of 1.6% over 725 feet, in Argentina.
Minera Andes has a market cap of $186 million.
For comparison, Capstone Mining hit "high grade copper" of 1-4% copper of 12 to 22 feet, in Mexico.
Capstone Mining has a market cap of $142 million.
If there is one rule to investing, it's to buy the best deals of which you know.
If you are going to invest in an exploration company, where do you want to fund drilling? Near a hole that hit 60% copper--especially when the market cap is so cheap? Of course! Who else in the world has hit such high grades of copper? I think that might be the highest grade copper discovery in the world.
A typical open pit copper porphyry mine must have at least .5% copper--that's half of one percent. A typical underground copper mine must have around 2% copper, or so.
Copper prices have risen from a low of about $.75/pound in 2003 to a recent high of $4/pound.
Copper prices are expected to continue to rise, due to numerous factors.
First, there is ever increasing demand from China and India. Second, there are low copper inventories. Third, existing production is strained due to workers going on strike or mines closing. Fourth, there has been under-investment in mining for decades. Fifth, it takes a very long time to go from exploration to production; which can take up to 10 years.
Here's an article from yesterday:
Copper may rise up to 50% on fund demand, Sucden says
Copper prices in 1973, true inflation adjusted (not CPI adjusted) were about $6.00/lb. or more.
The copper market had a few longs back in the late 1990's who were "busted" for manipulation. I maintain that manipulation is impossible for longs, since if it's your money, you ought to be free to buy what you want, as that is the nature of freedom, which is the opposite of manipulation. If they don't let you buy, that's manipulation! So, due to such weird things, I suppose it's not unexpected for the world to have nearly "run out" of copper! Further, it will be years for copper supply to catch up to demand, because demand is slated to increase for 10-20 years as China, and India, continue to industrialize.
I've heard that there is about $150 worth of copper in a car. It does not matter too much to the price of a $20,000 car if the copper price doubles or triples. Copper is still needed in electrical wires, and copper pipes. China is desperately trying to bring electric power all over their nation, so that people don't have to crowd into the cities to get jobs and a better lifestyle.
I believe commodity prices are also soaring due to inflation, and low gold and silver prices. Since gold and silver prices are too low, there is less gold and silver mining, and less byproduct copper, zinc, and lead produced. Instead, silver is the byproduct from gold, copper, lead, and zinc mining! I think the world had, and will have, plenty more copper when precious metals prices are higher. Free trade with China is a fundamental economic truth that is revealing the fraud of our paper dollar economy.
Getting back to the company that hit this recent 40% - 60% copper discovery.
The bad news is that, so far, the spectacular results are from only one drill hole--which is not really enough for a resource calculation. So, we do not yet know how large the overall mineralization is.
The good news is that the company has another group of other holes ranging from 2-7% copper. Further good news is that they will be drilling very soon!
The stock jumped from $.50 to $2.30 on a news release of this copper discovery, not on any promotion, back when copper was about $2.25, in January.
There are several phases to the discovery process. The first part is when the company makes the discovery. The second part is when the market discovers what the company discovered! The third part is when the company uses money from the market to further prove up the discovery. The fourth part is when the market discovers the growing discovery story. Right now, we are in the middle of "part two".
Today, copper recently hit $4/pound, and is bouncing back up from the recent dip.
Here is an historic, inflation-adjusted copper chart. But inflation is higher than they claim in the CPI, which means that copper prices were even higher in the past--higher than the prior peak of $16/lb., in the late 1800's during the last industrial revolution. It seems to me that copper prices could easily reach between $5 and $10/lb.
Although this is not a silver nor gold stock, this company has silver and gold, too! 1/3 oz./tonne gold over 54 feet, and 7 & 18 ounces/tonne of silver over 5 & 6 feet.
I own shares of this company; and it has not paid me to promote their company.
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