Natural Resources
28 July 2022
Los Andes Copper
Los Andes Copper Ltd (TSX-V:LA) * is a Canadian junior exploration and development company with an exciting copper project in Chile. RFC Ambrian ranks Los Andes as one of the top five copper companies with a high probability of being of interest to a third-party because of the size, quality, and location of the Vizcachitas project.
Los Andes currently trades at just 0.12 x its NAV, at a considerable discount to some of its peers. We place a price target of C$37.50/share (+154%) based on an EV/NAV multiple of 0.30x, in line with its peers.
A Standout Project Relative to its Peers: Relative to a peer group of independently owned copper projects, Vizcachitas currently has the third largest resource and an above average copper grade, and a Preliminary Economic Assessment (PEA), completed in June 2019, suggests the third largest copper production at 111 kt/y over the life of mine (150 kt/y for the first decade). The project also has the lowest LoM capital intensity and total operating costs of USc158/lb. The NPV and IRR are high amongst the peer group and the capital efficiency is in the first quartile.
Good Infrastructure and Location: The project is located in the Andes in Chile, in the same region as a number of large copper mines. It is in an area with very good transport, water, and power infrastructure. The project further benefits from a low altitude, and year-round working conditions
A Significant Copper Asset: The historical drilling by Los Andes Copper has resulted in a major resource containing 7.7 Mt of copper grading 0.37% Cu and remains open in most directions. A large drill program is planned to re-start soon with an expansion of the resource base likely to follow in 2023.
A Focus on Development: Los Andes Copper has a highly experienced board and management team following a recent restructuring and is focused on progressing Vizcachitas to pre-feasibility study (PFS) by the end of 2022. RFC Ambrian anticipates that the exploration drilling and the PFS will raise the exposure of Los Andes Copper and is the next catalyst for a potential re-rating of the shares.
In our Copper Projects Review published in November 2021 we highlighted a growing shortage of large-scale copper projects for future development by the copper industry. Many of the projects that are available are located in high-risk jurisdictions and/or are encumbered by increasingly tough environmental and permitting issues. This lack of opportunity continues to raise the value for those assets that are available
M&A Potential Supports a Strong Valuation: RFC Ambrian ranks Los Andes Copper as one of the top five copper companies having a high probability of being of interest to a third-party. The company is currently trading at a significant discount to many of its peers, both in terms of EV/t of contained copper resources and EV/NAV. In previous copper reports, we have shown that historically the average price paid for projects at feasibility stage is US$193/t of in situ copper equivalent resources, which implies a takeout price of C$79.50/share for Los Andes.
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* RFC Ambrian acts as Financial Adviser to this company
Research
David Bird
+44 (0)20 3440 6800
david.bird@rfcambrian.com
Corporate Broking
Charlie Cryer
+44 (0)20 3440 6834
charlie.cryer@rfcambrian.com