Buying junior mining stocks can be like buying lottery tickets, but it shouldn't be
- The recent drill results hit some major copper-moly intercepts with nice grades like 506.0 m @ 0.57 % Cu, 357 ppm Mo and 1.1 g/t Ag (0.67 % CuEq) in hole V2017-10. Sounds great, right? The newsletter writers certainly made it seem so. Unfortunately, this intercept started 486 meters down the hole and this was a pretty steeply drilled hole (75 degrees). Why is that a problem? These are only good grades for a large open pit operation and anything this deep is too deep for a pit. Just think about how much would it cost and how long it would take to pre-strip the 400 meters of waste rock on top of the mineralization in this area; also, as the pit goes deeper, the sides will get pushed out into unmineralized rocks, further adding to the amount of waste and cranking up mining costs by hundreds of millions of dollars. Using my lottery analogy, this intercept is like getting all of last week's winning numbers on this week's ticket. You're not getting a prize, sorry.
- A PEA on the Vizcachitas project was completed in 2014 and it confirmed my suspicions. The initial capital was $2.9 billion dollars. At $2.75/lb copper and $13.64/lb moly, the after-tax NPV was a meager $274 million with an IRR of 9.5% and a 6 year payback. Those are not good rates of return for such a massive investment, so this project is not likely to go anywhere until metal prices are much, much higher.