Lumina Copper update

by James Kwantes

That thud you heard yesterday was Lumina Copper stock dropping a further 8.5% on news that its strategic review process has yet to land a buyer for the company’s Taca Taca copper-gold-molybdenum deposit in Argentina – not the easiest place to do business. It wasn’t the NR expected by takeover-hungry investors, who took the stock down hard. Yesterday’s prevailing market funk didn’t help matters.

The price action is further proof – if any was needed – that investing in the junior mining sector is not for the faint of heart. Since I wrote up Lumina Copper one month ago, shares have risen as high as $11.87 and fallen as low as $8.60, yesterday’s low point.

However, nothing much has changed. Mining legend Ross Beaty remains at the helm with 23.7% of outstanding shares (he controls a further 3.3% of S.O. through Lumina Capital Limited Partnership). Taca Taca is still one of the world’s largest undeveloped copper deposits and the infrastructure is excellent, with easy access to power, water supply, a rail line and port facilities. Tuesday’s news, translated, is this: Ross Beaty didn’t get the price he wanted.

Key takeaways:

Timing: Lumina’s Taca Taca project will be sold in 2013, not 2012. The latter date was suggested by this recent corporate presentation posted on the company’s website, a detail that didn’t help the company’s cause yesterday. Lumina Copper now says a preliminary economic assessment will be completed during the first quarter of 2013.

Drilling: 129,000 metres of drilling is now complete at Taca Taca, and a new 43-101 resource estimate incorporating 65,000 metres of new drilling is projected to land before the end of the year.

Financing: The company raised $23.75 million by issuing 2.5 million shares at $9.50 in a non-brokered private placement to an “arms-length party.” The cash raised will fund company operations, including completion of the PEA, and repay a $13-million loan to Lumina Capital.

Tuesday’s news release contains the dreaded line “shareholder value creation,” but Lumina Copper management has already illustrated that’s no hollow phrase. One year ago, Lumina Copper spinout Lumina Royalty and its four royalty streams in Chile and Argentina — including royalties on Taca Taca and Teck’s Relincho — were sold to Franco-Nevada for $66 million in FNV shares and warrants.

If you like Lumina Copper’s management team and believe its Taca Taca deposit would be an attractive asset for a copper company that needs to replenish dwindling reserves, Tuesday’s news only signals that more patience will be required than initially thought necessary. But good things will probably still come to those who wait.

Disclosure: I own shares of Lumina Copper. This article is not investment advice and all readers are advised to do their own due diligence. Please read my disclaimer.

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