Gerardo Del Real: This is Gerardo Del Real with Resource Stock
Digest. Joining me is president and CEO of Kutcho Copper
Corp. (KC:TSX.V), Mr. Vince Sorace.
You know it's been quiet as far as the share price goes, until recently.
And it's not a coincidence that news flow is really picking up. You had some
news yesterday. And it's an important piece of news because you've now
commenced field mobilization, and this includes the mobilization of heavy
equipment, camp facilities, and as important as anything, the drill rigs.
Let's talk about the 2018 field program and what you're trying to accomplish,
Vince.
Vince Sorace: We're getting to work. There's been a lot of planning
going on in the last four months. And so at this point we are going to start
executing on everything that we said we were going to. That's going to
involve a number of exciting aspects with respect to the project. As we've
talked to you in the past, the real potential behind this project is that
it's already a very highly economic, high-margin project with a manageable
capex. We see the potential to expand the size of this and make it even more
robust.
That'll be our plan of attack this year and what we're going to capture
during this field season. The drill rigs will be looking to capture a lot of
upside potential and that resides in converting a bunch of the inferred
resources—there's a lot of low-hanging fruit there—and potentially some new
stuff on the exploration side. All this will feed into the feasibility study
in Q2/2019. But the results of that will be apparent coming throughout the
summer. There'll be lots of news flow this summer with respect to the
drilling that we're doing, with respect to optimized metallurgical programs
that we're advancing, with respect to restating our resources in the fall. As
a result of this field season, we're targeting a 65–70% increase in reserves
heading into the feasibility study. And all this will have a significant
positive impact on the already robust economics of the project.
Gerardo Del Real: You mentioned how robust those economics are, and
let me just provide a bit on context. The base case estimate of the last
prefeasibility study gives an after-tax net present value, at an 8% discount
rate, of CA$265 million and an internal rate of return (IRR) of 27.6%. And
that's using metal prices way below where they're at right now. That's using
metal prices of $2.75/pound copper, $1.10/pound zinc, $17/ounce silver, and
$1,250/ounce gold.
Also, you're basing that on reserves from a Measured and Indicated
resource that is 49% smaller than what's currently stated in the 2017
preliminary feasibility study. So I think that should provide some context as
to what the upside is. You are starting this drilling program with two
diamond drill rigs. Is that correct, Vince?
Vince Sorace: Yes, that's correct.
And just to add to that previous comment. It doesn't take much. We've done
a lot of this work at $3.10 copper and with some higher zinc prices—you can
see this in our presentation—it already has a $100 million impact to NPV. So
very sensitive to copper prices. I think the sentiment out there is very
bullish on copper, now and in the coming years. So just the commodity price
alone has a substantial impact on what the project economics are going to
look like. And I'll also say we've identified a lot of opportunities, even in
opex and a few other areas, that I think we'll be capturing in the
feasibility study that can also help feed into the project economics as well.
Gerardo Del Real:Excellent. Who do you have leading the feasibility
study?
Vince Sorace: We chose Ausenco Engineering. A great outfit, they've
got lots of experience in doing this, a very practical shop. We believe the
guys are very good at what they do and we think they're going to deliver a
great product to us at the end of this that will recognize the potential of
the project.
Gerardo Del Real: You executed a deal in 2017 with Wheaton Precious
Metals Corp. (WPM:TSX; WPM:NYSE) that I think was one of the best, if not the
best deals in the junior space. How is the support from the Wheaton group
coming along?
Vince Sorace:Wheaton's commitment is firm and strong. They are very
big supporters of this project. They believe and want to see this project
into production. They've just been an outstanding, and will continue to be a
great partner for us. We recently received the first tranche of the upfront
money that they committed to us, that was US$3.5 million, I guess about a
month ago. And we're expecting to receive the second tranche of that, similar
amount, in the coming couple of months. I'm in constant communication with
them. They are an outstanding group of individuals and fully supportive of
our efforts moving forward.
Gerardo Del Real: You also recently signed an Exploration and
Communication Agreement with the First Nations group. Can we talk about that?
Because we know how important the social license is.
Vince Sorace: We have put a lot of emphasis with respect to the
social license and this project moving forward. That's reflected in the
permitting team we've put together on this project. We have, and we will
continue to, put a lot of emphasis on that. I would say that the
relationships that we've formed already with respect to the First Nations are
fantastic. At this point we're all on the same page. It seems like it's going
to be a joint effort for all parties involved to move this forward. I think
we're lucky to have the First Nations partners that we do on this project and
we look forward to a great relationship with them.
Gerardo Del Real: You know the last time we spoke, Vince, I talked
about how impressed I was with the board of directors and the management
group. I believe it's Allison Rippin Armstrong that's leading that effort
with the community and environment relations.
Vince Sorace: Yes, it is. And she has a lot of experience with this
and I believe that that will pay off in spades moving forward.
Gerardo Del Real: Well I know she led the charge for Kaminak, which
of course was acquired by Goldcorp Inc. (G:TSX; GG:NYSE) in 2016 for $520
million. So it looks like you're in good hands, Vince. Lots of new flow the
rest of the year. I hope you can come back here in the next month or two as
those drills start turning. Thank you so much for your time today, Vince.
Vince Sorace: Thank you very much.
For the past decade, Gerardo Del Real has worked behind-the-scenes providing
research, due diligence and advice to large institutional players, fund
managers, newsletter writers and some of the most active high net worth
investors in the resource space. He brings his extensive experience to the
public through Outsider Club, Resource Stock Digest, Junior Mining
Monthly, and Junior Mining Trader.
Disclosure:
1) Vince Sorace: I, or members of my immediate household or family, own
shares of the following companies mentioned in this article: Kutcho Copper. I
personally am, or members of my immediate household or family are, paid by
the following companies mentioned in this article: None. My company currently
has a financial relationship with the following companies mentioned in this
article: Kutcho Copper.
2) Gerardo Del Real: I, or members of my immediate household or family, own
shares of the following companies mentioned in this article: Kutcho Copper.
My company currently has a financial relationship with the following
companies mentioned in this article: Kutcho Copper is a sponsor of Resource
Stock Digest.
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