|Insider buying and other items of importance for 2018|
A few quick thoughts on MUX since there is a lot going on at the company:
1) Insider buying in the last week of December was consistent with what we have seen in other precious metals companies in recent months. While the dollars amounts were not huge it is certainly a good sign.
2) Activity in Timmins should create some news over the next few months and at least an update at PDAC in March on how the drilling is going. As I mentioned previously, a $10 million flow-thru offering indicates the geological model is working. Also, there is way too much gold already on the books at Timmins to not increase mill throughput to at least 200,000 ounces a year. I suspect size of increase/expansion will depend on drilling results.
3) Los Azules/Copper is getting very interesting. Page 22 of recent presentation indicates that $3.50 copper gives the project a 2.5 year payback and an IRR of 25.1%. However, if copper goes to $4.00 per pound which is still below its previous high of $4.60, the payback goes down to only 2 years with a IRR that would be somewhere in the 28 to 30% range. (PEA is source of $3.50 numbers and IRR not given for $4 copper and is an estimate.) Not to get ahead of ourselves but a two-year payback on a multi-decade project is very attractive to MUX's future partner. Not saying copper at $4 is around the corner but it is only ~20% high than current spot prices.
Copper is getting very interesting here given that:
a) Huge inventory drawdowns at LME with inventory now near 1 and 5 year lows. This should be supportive of prices.
b) Large number of labor negotiations this year. While impossible to handicap the impact of a potential strike, labor will likely take a tough stance since the copper price is at multi-year highs.
c) The investment driver that dictates prices will shift from housing to EVs this year. While EVs still consume a fraction of the copper that housing consumes, there are plenty of analysts that are projecting huge coming demand from EVs that will greatly impact prices. This will be interesting to watch.
Obviously, with countries like Zambia and Indonesia making themselves increasingly unattractive to foreign investors, the market should remain tight for a long time.