Red Cloud Securities just initiated coverage on this Canadian copper exploration and development firm with a compelling project portfolio.
Given that World Copper Ltd. (WCU:TSX; WCUFF:OTCQB) is an "emerging copper oxide developer" with three strong assets, Red Cloud Securities initiated coverage on the company with a Buy rating and a CA$2.15 per share target price, reported analyst Taylor Combaluzier in an April 4 research note. In comparison, World Copper's current share price is around CA$0.67.
"World Copper is poised to advance two high-quality copper development projects in two tier-one copper mining jurisdictions," Combaluzier wrote and discussed the projects.
Also favorable for World Copper, the analyst noted, is the likelihood of higher copper prices in the coming years.
Combaluzier explained that the company's flagship project is Escalones in Chile, on which a Q1/22 preliminary economic assessment (PEA) on the copper oxide project was robust. At Escalones now, a 5,000 meter drill program is underway to expand the existing resource or make a new discovery.
"We believe Escalones shows compelling economics when compared to other copper development projects and that it offers lots of potential for resource expansion," Combaluzier wrote.
As for the economics, the PEA forecasted for Escalones a $1.5 billion (US$1.5B) net present value discounted at 8% (NPV8%) and a 46.2% internal rate of return (IRR), using a $3.60 per pound copper price. At $4 copper, the NPV8% increases to about $1.8B and the IRR to around 53.6%. Also of note, according to Combaluzier, estimated capex of about $8,416 per copper ton is lower than the average of company peers, $15,000 per copper ton.
"We believe World Copper remains undervalued and the positive economics outlined in the Escalones PEA could potentially help rerate the stock," wrote Combaluzier.
All PEA figures are associated with an open-pit mining and conventional heap-leach processing operation producing an annual average of 115,000,000 pounds of copper over the mine's 20-year life. The PEA was based on an oxide-only resource of about 426,000,000 tons of 0.367% copper for about 3,450,000,000 pounds of contained copper.
World Copper's second project, Zonia in Arizona is at the PEA stage, but given how easy it should be to permit, it could start generating cash flow sooner than Escalones.
"We believe Zonia has lots of untapped potential, as it could either be rapidly developed for nearer-term production or potentially be expanded through exploration to increase the scale of the project," Combaluzier wrote.
World Copper's third project, Cristal, in a favorable copper mining jurisdiction in northern Chile, "offers blue sky discovery potential," noted Combaluzier.
Catalysts expected in 2022 for World Copper are drill results from Escalones in H1 and an updated PEA for Zonia by year-end.
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Disclosures for Red Cloud Securities, World Copper Ltd., April 4, 2022
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