PDAC 2014: Lumina Copper’s staying power

Peter Koven of the Financial Post interviewed Lumina Copper CEO David Strang at PDAC and wrote a short piece here. Strang notes in the article that he’s said at the last two AGMs that he didn’t expect the company – which has had a “For Sale” sign up for a while – to be around the following year. M&A activity is heating up, including HudBay’s hostile bid for Augusta Resource, whose Rosemont copper project has a fraction of the copper contained in Lumina’s Taca Taca deposit (albeit in the more favourable jurisdiction of Arizona vs. Argentina).

With all seemingly quiet on the Lumina Copper front, however, perhaps this is the year Taca Taca gets sold. Lumina’s largest shareholder is Vancouver mining magnate Ross Beaty, who owns 22% of the stock and has a stellar record of creating shareholder value. Management also has skin in the game (Strang owns 1.2% of outstanding shares). The company has 44 million shares out and the stock is currently at $5.25, giving it a market cap of roughly $235 million. I wrote up Lumina here at World of Mining back in September 2012 (see related links below) but pulled the plug and sold most of my shares when a takeover didn’t materialize.

Lumina’s Taca Taca deposit in Argentina’s Salta province has an NI 43-101 resource estimate of 21 billion pounds Cu and 5.5 million ounces Au in the indicated category, and 7.5 billion pounds Cu and 1.5 million ounces Au in the Inferred category. A PEA shows a net present value of $2.1 billion and initial capex of $3 billion at an 8% discount rate, using conservative metal prices ($2.75/lb Cu, $1,200/oz Au). Taca Taca is worth considerably more using the higher metal prices that many junior mining companies are using. The deposit is 120 km away from Escondida, the world’s largest copper mine, and is close to infrastructure including roads and rail, as well as available water. It’s the Argentina part that seems to be the main sticking point here.

Disclosure: I own some Lumina Copper shares in an RRSP account. Please read my disclaimer; all investors should do their own due diligence.

Related links:

Ross Beaty a big winner in HudBay/Augusta offer | World of Mining

Mining tycoon Ross Beaty is back and he’s funding gold exploration in Brazil | CEO.ca

Lumina Copper: Good things come to those who wait | World of Mining

Rebalancing, Part 1 | World of Mining

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