Gold and Base Metal Companies Are on This Expert's Shopping List

Au Report

Source: Adrian Day for Streetwise Reports 11/11/2017

Adrian Day of Adrian Day Asset Management reports on news at three resource companies, calling each company “different” and “on the shopping list.” 

Prepared for the Next 20 Years

Altius Minerals Corp. (ALS:TSX.V, CA$12.40), one of my top non-gold resource companies, just celebrated its 20th anniversary. Base metals—primarily zinc and copper—now account for over 45% of the company’s revenues, a pleasing change from the earlier coal-heavy allocation. A copper spinoff is in the works, following a successful zinc spinoff. In these spinoffs, Altius retains a share interest, which it tends to subsequently sell down to raise capital, while retaining a royalty interest.

Altius continues to pay down debt, nearly $5.5 million this year, as well as buying back shares, 154,000 in the last quarter. CEO Brian Dalton said he was frustrated that he could not buy back more shares, but they are limited by the rules based on the number of shares traded.

Well positioned for iron ore

Interestingly, Dalton also indicated he was “certainly optimistic” now on an iron ore recovery and noted that Newfoundland and Labrador ore sells at a premium to Australian ore. The company is very well positioned in iron ore, with several joint ventures, exploration land and royalties.

Altius’ stock has moved strongly through the summer and autumn from lows around $10. With strong management, a solid balance sheet and financial backing, numerous royalties as well as development and exploration land, Altius is one of our handful of top companies in any sector. At the current price, it is not fundamentally expensive, but given the recent move and that the stock can be volatile, we would look to buy on a pullback.

Strong Report on Timok

Nevsun Resources Ltd. (NSU:TSX; NSU:NYSE.MKT US$2.35) released its preliminary economic assessment (PEA) on the Timok upper zone, acquired from Reservoir Minerals a year ago. With a 15-year mine life, it is scheduled to produce 1.1 billion pounds of copper in its first four years, and 2.1 billion for the life of mine. (Grades decline significantly toward the end of the mine life.)

The economic projections are strong: The project has a net asset value of $1.5 billion, after tax, at an 8% discount rate. Nevsun bought Reservoir for the equivalent of $365 million. The project, with an initial capex of $360 million and a payback of less than 1.5 years, it has a very robust IRR of 50%. The numbers are based on $3/lb copper and $1,300/oz gold; copper is currently just above, and gold just below these prices. The capex number excludes two payments that have to be made to Freeport, $45 million on a build decision and $50 million on achievement of commercial production.

Significantly, Nevsun believes there is potential for expansion of the resource, including more high-grade mineralization (“geologically, there should be,” said CEO Peter Kukielski).

Looking ahead …read more

Source:: The Gold Report