Saturday, 18 January 2020

TNR Gold Royalty On Los Azules Copper With McEwen Mining: Copper Is Learning Mandarin Again - M&As In The Copper Space Could Surge In 2020.

Any bad peace is much better than the best war. After signing the trade war deal China is expected to be back on the buying spree of all best copper projects they can find. It is very important to mention here that during the signing ceremony POTUS indicated that now we have his own "Whatever It Takes" put for the markets. His comments about AIG "being left without life support during the Great Financial Crisis" will go far if you consider them together with his new nominations to the FED. 

There is still a big room for the QE pump of liquidity, particularly, if FED will be formally accused of treason and pronounced to be "the enemy of the state" for not allowing negative rates "like in Europe". 

Behind the scenes, copper M&A preparations were ongoing all the time and timing could not be better as we discussed. Now even Minister from Chile is talking about the artificially low prices of copper due to the trade war tensions and rumours are swirling about M&A deals being in the making once the major uncertainty is removed from the market. 

Financial Post is giving us a glance at these discussions in industry boardrooms and experts are sharing their views on the potential acquisition targets which are driving the valuations in the markets already. All rumours must be confirmed by the announcements and there is no need for the unwarranted speculation: even Barrick Gold is openly talking about the quest for "Strategic Copper" in search for the growth. We have discussed already how the mining world is really small.

For all our followers it will be a very interesting situation. TNR Gold is holding NSR Royalty on the entire Los Azules Copper in San Juan, Argentina. The "sleeping giant" - as Rob McEwen calls it - is being developed by McEwen Mining. Rob McEwen has partnered with Eric Sprott and Electrum Group in the quest for the next Donlin Gold in Alaska - the giant gold project which is being developed by JV between Nova Gold and Barrick Gold. The new venture is making waves in the industry after first drilling results and bought financing last week. TNR Gold is advancing Shotgun Gold near the Donlin Gold in Alaska and looking for a strategic partner to grow together and now Barrick Gold is looking for strategic copper for growth. The mining world is really small once you start counting respectable people with money. 

Discussions about Freeport McMoran being the target of Barrick's copper ambitions will be addressed by professional journalists in the weeks ahead of us. I would like to point out here that Rob McEwen is looking for the strong JV partner to advance Los Azules Copper and has provided a very interesting update on the project and was talking about the truly unique entry point proposition for the potential partner and his vision how to move the giant venture forward. We can only dream for such a partner as Barrick Gold for our Royalty holding at TNR Gold in addition to Rob's Midas touch, but maybe such dreams are not totally out of this world after all.  

Barrick Gold is already well presented in Argentina, they always put asset quality before any jurisdiction challenges and Argentina is willing to move forward with the development of mining projects according to the confirmation from the new President during the meeting with major mining operators in the country. Barrick already has Pascua Lama project in San Juan which is unfortunately located right on the border of Argentina and Chile and even strategic partnership with the Chinese company has been lined up in order to advance this kind of scale opportunities in the region. 

Here Los Azules is coming as a very attractive target both in size and location. McEwen Mining was awarded PAE - a special protocol signed by Argentina and Chile this summer - which allows cooperation between two countries in order to advance this project. Move with Los Azules can provide Barrick with the opportunity to secure the project at the very attractive cost of entry in JV with McEwen Mining and reshape its strategic presence in South America while Pascua Lama can still remain a very expensive landscape exercise with angry Chilean farmers living below it. 

"TNR also holds a 0.36% NSR on the Los Azules Copper Project, located in San Juan Province of Argentina. The Los Azules Project is owned 100% by McEwen Mining Inc (NYSE:MUX) and is expected to be the 26th largest copper mine in the world once it reaches production. 
A PEA at the project completed in September 2017, demonstrated a post-tax NPV8 of US$2.2bn with a post-tax IRR of 20.1%. Based on the PEA figures the mine is expected to generate average revenue per annum of U$953mln, which could generate around US$3.5mln a year to TNR over 37 years."

Now investors can do their own research and start putting the different pieces into their own valuation puzzle. Rob McEwen has prepared Los Azules to the potential major JV deal in the copper space. Agreements between Argentina and Chile are signed in order to advance the Los Azules project and the new road is being under feasibility study. The new approach by Rob McEwen which he has articulated in order to jump-start the development is making a huge difference for any potential partners:

"McEwen Mining conference call, Robert McEwen -- Chairman and Chief Owner
Happy to. We had past discussions with a senior base metal producer. What we were looking for was recovering part of the cash we put in. We were looking for $100 million upfront that the partner would advance the project to feasibility and then into production and we would continue with an interest of 20% or 25% of the property going forward."

Needless to say that any potential deal will bring the new valuation drivers for all parties involved: McEwen Mining and TNR Gold, as the project will be moving into the feasibility and construction stage. Development of Los Azules will provide enormous economic benefits for San Juan, which is ready to support this kind of responsible mining business for the benefit of proud people of Argentina. I have been calling Argentina the potential Energy Power House for many years, it can finally coming all together now.

Please always read legal disclaimer. There is NO investment advice on any Kirill Klip feeds and blog. Always consult a qualified financial adviser before any investment decisions. 
Do Your Own Research.

Financial Post:

M&As in the copper space could surge in 2020, especially if Chinese companies come to the party

"Copper open interest — or the amount of unsettled derivative contracts — is rising at fastest pace since 2016 U.S. election"

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