Cheap Copper
Hey Everyone -
First off I'd like to thank Kaveh, Alex, and Matt for putting this blog up.
My first post is about one of my favorite equities - Corriente Ressources (CTQ on TSX), a copper-gold exploration company based in Ecuador. Although the stock has more than doubled in the past year, it still isn't too late to find value. Here's why.
First of all, the NPV of the Mirador Project (a 20x80 kilometer copper belt), its principle exploration project, is valued well above the market cap of the firm - the market cap is roughly 222M, and, depending on the price of copper when it hits the market, the value of the content is between 200-600M, for this mine alone, based on independant feasibility studies. Seeing as the price of copper is continuing to rise, the the current price is in the very-upper range of the sensitivity analysis, the mine could be worth north of 600M. This, however, is not a pure play on the price of copper - it is a play on a undervalued company in a foreign country.
So why is the location, Ecuador, attractive, you may ask? There are two reasons for this. First of all, there is an absurd amount of political risk priced in, and you can often find value when this occurs (think Petro-Kazhakstan, which was trading at a P/E of 4 before finally being bought out after 2 rounds of potential takeovers at an 80% premium). The situation is very simular for Corriente - like PKZ, it is a ressource-based company that operates in a foreign country, but with Canadian ownership. Although there is much concern about political instability and a shift towards socialism (very left) in South America, this has not affected the operations of Corriente so far. In terms of the risk of inflation, the copper would be sold for U.S. dollars and repatriated to Canadian shareholders (the copper is not sold in Ecuador).
The second attractive thing about the location is its proximity to both South America (one of the fastest growing markets in the world), and China. Situated directly on the Pacific Ocean, it's just a stone's throw away from Asia (ok im exagerating...).
So anyways have a look - it's hard to find info on yahoo but you can find info on stockhouse.ca, as well as on the website at www.corriente.com.
First off I'd like to thank Kaveh, Alex, and Matt for putting this blog up.
My first post is about one of my favorite equities - Corriente Ressources (CTQ on TSX), a copper-gold exploration company based in Ecuador. Although the stock has more than doubled in the past year, it still isn't too late to find value. Here's why.
First of all, the NPV of the Mirador Project (a 20x80 kilometer copper belt), its principle exploration project, is valued well above the market cap of the firm - the market cap is roughly 222M, and, depending on the price of copper when it hits the market, the value of the content is between 200-600M, for this mine alone, based on independant feasibility studies. Seeing as the price of copper is continuing to rise, the the current price is in the very-upper range of the sensitivity analysis, the mine could be worth north of 600M. This, however, is not a pure play on the price of copper - it is a play on a undervalued company in a foreign country.
So why is the location, Ecuador, attractive, you may ask? There are two reasons for this. First of all, there is an absurd amount of political risk priced in, and you can often find value when this occurs (think Petro-Kazhakstan, which was trading at a P/E of 4 before finally being bought out after 2 rounds of potential takeovers at an 80% premium). The situation is very simular for Corriente - like PKZ, it is a ressource-based company that operates in a foreign country, but with Canadian ownership. Although there is much concern about political instability and a shift towards socialism (very left) in South America, this has not affected the operations of Corriente so far. In terms of the risk of inflation, the copper would be sold for U.S. dollars and repatriated to Canadian shareholders (the copper is not sold in Ecuador).
The second attractive thing about the location is its proximity to both South America (one of the fastest growing markets in the world), and China. Situated directly on the Pacific Ocean, it's just a stone's throw away from Asia (ok im exagerating...).
So anyways have a look - it's hard to find info on yahoo but you can find info on stockhouse.ca, as well as on the website at www.corriente.com.
posted by Mike Hudgin at
3/14/2006 01:17:00 PM
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