TNR Gold Corp (TSX-V:TNR, OTC:TRRXF) earlier this week discussed new developments at the Los Azules copper project following the release of a feasibility study by McEwen Copper.
The company told investors that the study confirmed Los Azules as a low-cost, long-life, and high-purity copper cathode producer. Initial production is projected at over 200,000 tonnes annually in the first five years, followed by an average of 148,000 tonnes per year across a 21-year mine life.
Proactive: McEwen Copper has announced positive results from the feasibility study for the Los Azules copper project in Argentina, and it confirms an economically robust copper project and also a leading ESG performance.
Kirill Klip: We are building the green energy metals, royalty and gold company. And as we discussed before, this year we are graduating from a project generation company into a cash-flow royalty generating company. Ganfeng Lithium put Mariana Lithium into production in February. And now Rob McEwen has delivered us another very big reason for celebration.
The feasibility study confirms that Los Azules is a low-cost, long-life, high-purity copper cathode producer with very strong economic data and sustainability.
Take us through some of the study highlights, because I see that they point out it's a significant mineral resource with further scope for growth.
Yes. Rob McEwen is talking about increasing production in the first five years to over 200,000 tonnes of copper, and then over the 21-year life of mine, an average of 148,000 tonnes annually. The cash cost is $1.71 per pound, and the all-in sustaining cost is just $2.11 per pound. And the copper price used is $4.35 per pound.
In terms of the mineral resource, we should mention the large porphyry targets on the property, which could be drilled next.
It’s also being designed for low environmental impact. So really ticking that ESG box at the same time.
Yes, exactly. This is a giant project, among the 10 largest in the world. Proven and probable reserves are 10.2 billion pounds of copper. In the measured and indicated resource category, we now have 5.4 billion pounds, and in the inferred resource category, 20 billion pounds of copper.
Rob McEwen is aiming to make the project’s footprint as small as possible. This project will use significantly less water — about 70% less than normal copper projects — and it will produce copper using renewable energy.
Talk to us about the financing, construction and also potential partners to build. As we've discussed before, the IFC is potentially leading the debt financing.
Yes. Rob McEwen’s team is lining everything up to make a construction decision. As we discussed last week, IFC signed a collaboration agreement with McEwen Copper. Now we can talk about the potential participation of the IFC in equity financing. They could become a lead lender and investor in the project.
A very important announcement came just before the feasibility study. Los Azules was accepted into Argentina's large investment incentive program. This offers significant tax reductions, free flow of hard currency, and smoother transition of goods.
From the feasibility study, we’re seeing more details about potential partners. YPF, a large Argentine power producer, is allocating over $400 million to build a line to power the project with renewable energy. That cost is not included in the mine construction budget.
Rob is now talking about commitments of up to $1.1 billion from economic export agencies in Europe and equipment suppliers, which could cover up to 80% of the mechanical costs.
As we continue to see M&A activity among royalty companies, what does that tell you about the potential valuation of your NSR in Los Azules?
Yes, it’s a very important year for our shareholders. We’ve seen new industry players entering our relatively small royalty space, investing in many gold royalty companies and buying gold. There’s excitement in the sector.
Valuations are going higher, and we’ll likely see another wave of consolidation in the royalty industry. Rob McEwen previously estimated a potential valuation of $100 million for his royalty at Los Azules, based on a deal by Osisko Gold in Ecuador.
That gave us a reason to think about a $30 million valuation for the Los Azules royalty owned by TNR Gold. Now, we believe that may be conservative. Fundamental Research Corporation recently increased our target price from $0.28 to $0.30.
Now we can talk about potential royalty revenue of up to $10 million per year. We’re still checking the numbers, but we can now see estimated potential NSR cash flow that could give us valuations over $50 million for our royalty on Los Azules. TNR Gold already delivered a 100%+ increase in share price this year. We’re now working on another 100%+ milestone.
Quotes have been lightly edited for style and clarity