Doré Copper, high-grade #copper #gold in safe Quebec

Copper (“Cu“) demand is expected to grow at an average of 3.0-3.5%/yr. for decades to come, but a dearth of Major discoveries in the past decade (see chart) points to constrained mine supply growth in the 2030s-2040s, especially as many of the world’s largest (& oldest) mines are retired. There are about a dozen mega Cu projects in S. America.

Many have been stalled or slow-moving for years as the incentive Cu price to definitively get these giant low-grade assets off the fence is well above the current price. However, M&A might be picking up in S. America to kickstart development efforts. BHP & Lundin Mining recently announced the acquisition of one of the best of the pack, Filo Mining.

A lot More M&A is expected, most notably Teck Resources possibly acquired by; Rio Tinto, BHP, POSCO, Vale, Newmont, Barrick, Grupo Mexico, Freeport McMoRan, Glencore, or Fortescue Metals.

Of those, all are invested in junior miners {see chart above}. Notice I listed two Au Majors as potential suitors of Cu-heavy assets. Both tout their credentials in Cu to complement primary Au portfolios. This year, Barrick & Newmont are guiding to production of 430M & 335M pounds of Cu.

The world needs S. America’s mega projects and smaller ones globally to meet demand. N. America can’t rely on China, The DRC, Russia, Indonesia, Mongolia & Zambia for its Cu. Therefore, (U.S.) Cu production + Canadian imports will be highly sought after, especially mines that can start delivering pounds this decade.

Doré Copper Mining Corp. (TSX-v: DCMC) / (OTC: DRCMF) has a very high-grade Cu/gold (“Au“) [brownfield] project in the prolific, low-risk Chibougamau mining camp in Quebec, surrounded by infrastructure incl.; roads, power, water, rail, an airport, labor, equipment & services. The Company hopes to be back in production by 2028.

For a company with an enterprise value {market cap + debt – cash} of just $13M at $0.10/shr., Doré has an excellent mgmt. team, board & advisors (see above). More detailed bios can be found on the website and new corporate presentation.

Doré has a much smaller resource size, but 7x the average Cu Eq. grade of the largest S. American peers. And, it can reach production sooner than many of them. On September 4th, management announced a non-brokered (ongoing) equity raise at a weighted average price of $0.138/shr. to raise up to $4.6M.

Doré’s land package hosts 13 former mines, deposits & target zones within 60 km of the 100%-owned, 2,700 tonne/day Copper Rand Mill. The flagship Corner Bay [“CB”] project represents ~75% of a booked ~865M lbs. [Cu Eq. @ spot prices Au is worth ~22% of total in-situ value].

Note, there’s also a historical non 43-101 compliant resource of ~94M Cu Eq. at the Copper Rand target. Most of the Au is found at the Joe Mann & Cedar Bay deposits, which host high grades of 6.8 to 9.4 g/t Au. With the Au price doing so well, currently > $2.500/oz., the Cu Eq. grade of the Company’s 865M lbs. is ~3.6%.

In looking at the 2022 PEA sensitivities charts, I estimate that at $4.125 Cu & $2,500/oz. Au the post-tax NPV would be ~$255M (adjusted for 10% increases in cap-ex & op-ex, and a 5% move in the US$/C$ rate), and the IRR in the high 20’s percent.

The Company is pursuing a hub-and-spoke development strategy upon which a PEA was done in May 2022 showing a robust project with a post-tax NPV & IRR of $193M & 22% for producing 53M lbs. Cu Eq./yr. over 10.5 years. Upfront capital is reasonable at $181M and AISC is attractive at US$2.24/lb.

A $3.75/lb. Cu price was used, but if Cu rallies as much as some investment banks expect, ($5.44 to $6.80/lb.), next year’s BFS should incorporate a $4.00+/lb. assumption. Management is skipping a PFS because CB is a brownfield site and many economic trade-offs & flow sheet decisions have already been made.

The Company has a strong shareholder base highlighted by Ocean Partners & Equinox Partners with a combined ownership of 53%. Importantly, those ownership stakes do not box out other strategic investors. A minority interest at the project level could be sold.

The Company owns 100% of its assets, except for 50% of the promising GWILLEM Au target in a JV with Alamos Gold and a newly acquired 56% stake in a property tied to CB, with 44% owned by Pan American Silver.

Another multi-billion dollar producer with projects close to Doré is IAMGOLD Corp. Any of those three companies could be interested in acquiring Doré.

I believe Doré is oversold on fears of equity dilution, but with funding from gov’t grants & loans, Quebec institutions, commercial lenders, equipment financing, off-take agreements & royalty/streaming opportunities, production could be reached without excessive dilution.

Another enhancement to PEA economics could come from detailed flotation test work on a composite CB sample that determined a clean 28% Cu concentrate can be delivered vs. the 24.7% concentrate grade assumption in the PEA.

An increase in grade would lower smelter treatment terms, increase payment of Cu, and lower transportation costs.

Potential suitors are not just Cu players. Agnico Eagle, Newmont, Barrick, Franco-Nevada, Wheaton Precious Metals, Centerra Gold & B2Gold have been expanding into Cu from Au/Ag, while companies like Freeport McMoRan & Teck Resources have expanded from Cu to Au.

Management believes the cost to design, permit, fund, build & commission a new 2,700 tpd mill & tailings facility would be ~$125M. High-grade projects have far less environmental impact — less waste & energy per pound of Cu produced, and lower capital intensity than large, low-grade projects. These factors mean less project execution risk.

Although at the PEA stage, a BFS is expected in 1H 2025. Depending largely on nearness to production, high-quality BFS-stage mining projects are valued at 20% to 50% of after-tax NPV. For example, Rupert Resources has a large PEA-stage Au project in Finland valued at ~40% of after-tax NPV.

Montage Gold’s Pre-Feasibility-stage project in Côte d’Ivoire, Africa is valued at ~36%, and SolGold’s Cu/Au project in Ecuador trades at ~22%.

In stark contrast, assuming spot pricing at $4.125/lb.) Doré is valued at just ~5% of its PEA-derived NPV at spot prices (I added 10% to cap-ex & 10% to op-ex to adjust for inflation). This is a low-risk, high-grade restart story in a world-class jurisdiction.

EV/Li-ion battery manufacturing is picking up in Ontario & Quebec. Outside of Asia, southern Canada could be the fastest-growing EV/battery hub on earth. Combined with the northern U.S., dozens of OEMs are building factories to feed the U.S. market.

All roads lead to safe, sustainable N. American Cu assets that can be in production sooner rather than later. In 2028 Doré Copper plans to be producing 53M lbs./yr., at very high Cu Eq. grades. If one believes annual production & mine life can be expanded, then the Company is even cheaper than its headline metrics of C$0.015/lb. & 5% of post-tax NPV.

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