THEMAC RESOURCES GROUP LIMITED (CVE:MAC)
In October 2010, Kevin Maloney Chairman, Founder and 68.5% shareholder of THEMAC Resouces (via Tulla), sold his listed mining services group The MAC Services Group in a $651 million deal, from which he took about $340 million off the table.
The MAC Services Group Mr Maloney built from the ground up, hunting out opportunities in low cost operations and renting them accommodation, Like many Aussie's Kevin Maloney knows his way around a mine.
So with $340m in his pocket, where did Kevin Maloney head to, Monte Carlo, The Greek Islands, no he headed for the dusty plains of New Mexico looking for what he and I agree is the next big thing, Copper.
While journalists beat up the China hard landing story and Copper is trading very cheaply, many people have over looked the real copper news.
Africa, South America, Australia and Asia are closing the door on foreign ownership, introducing taxes and changing the future cost base of Copper. At the same time demand for Copper is rising beyond supply.
Global growth may have slowed a touch but due to the continued growth in emerging markets the consumption of commodities is expanding faster than supply. Heffernan Capital Management and Morgan Stanley predicts shortages in copper, palladium and iron ore this year and Barclays anticipates the same thing for tin.
China's economic growth will decelerate to around 8.1% this year and edge up to 8.7% in 2013.
China's manufacturing activity is far from optimistic despite the Country's Purchasing Managers Index (PMI) for the manufacturing sector put in a predictable slow Q1.
China's economy expanded by 9.2% in 2011 from a year earlier and 8.9% Y-Y in Q-4, according to the National Bureau of Statistics (NBS). ASEAN, BRICS and other Emerging markets are also growing at a solid rate, in short there are no real demand fears and the numbers support that fact.
Increased net imports and higher domestic production pushed implied consumption for refined copper in China, the world's top consumer of the metal, up 20.8 percent month-on-month in February, based on official customs data released on Wednesday.
Daily implied consumption of refined copper in China surged 44.7 percent from a year earlier, despite increased stocks in warehouses monitored by the Shanghai Futures Exchange.
China's inflows of refined copper rose 12 percent month-on-month in February to hit the third-highest level ever at 375,831 tonnes on delayed shipments from the holiday month of January and as buyers stocked up on expectations of rising demand during the peak March-May consumption period.
The imports rose 137.6 percent from a year earlier.
So far we have 2 Winners, Kevin Maloney, proven Miner/CEO/Chairman/Entrepreneur and Copper a Metal that has a solid future. The location in New Mexico is free from the problems facing the emerging markets.
Now lets take a look at the site:
The Highlights are
Drilling program underway with following main objectives: Better understand gold and silver controls Expansion of resource base through step-out and depth extension drilling Definition of additional high grade breccia resources Providing in-fill geotechnical data
Preliminary modelling indicates the early processing of higher grade material will likely remove capital sensitivity of the overall project (Capital payback potentially 2 years)
Status: Preliminary economic assessment (PEA) - Complete Prefeasibility study (PFS) - Underway Permitting - Underway
Planned Production: 36 million lbs copper per annum
Mine life: 17 years
Cash costs: US $1.41/lb copper equivalent
First production targets: 2014/2015
Resources: 107Mst Indicated 0.303% Cu, 0.01% Mo 46Mst Inferred 0.24% Cu, 0.006% Mo
Civil infrastructure in place: Tailings dam, largely pre-stripped open pit, power lines, water well field and pipeline, access roads, diversion channels and building foundations
At 36 Million Pounds of Copper per annum at an estimate of average $5 per pound in 2015 provides $180m in revenue, based on a cost of $2 (estimate) leaves $108m, if you include an excessively high interest and administration cost of $1 per pound, then gives a bottom line of $72m ignoring Gold etc etc.
At $72m and trading at a discounted multiple (FCX equivalent) with 74m shares on issue we should be looking at around $8 per share in production.
After the DFS the stock should move over $2, but the Heffernan Capital Management long term 2015 target remains $8 per share.
Shayne Heffernan oversees the management of funds for institutions and high net worth individuals.
Shayne Heffernan holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reach a peak market cap of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financial Services.
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