LSANF - Los Andes Copper: The Train Is Leaving The Station To A Higher Destination

2023-06-27 09:00:00 ET

Summary

• Los Andes Copper is a potential hidden gem in the copper mining industry, with its Vizcachitas project in Chile showing promising results and attracting interest from major mining companies.
• The company's recent pre-feasibility study revealed a significant increase in measured and indicated resources, as well as inferred resources, indicating a strong potential for growth.
• With a current share price of 17 CAD and a target share price of 65 CAD, Los Andes offers a four-time multiple opportunity for investors looking to capitalize on the growing demand for copper in clean energy and infrastructure projects.

Los Andes Copper

Los Andes Copper ( LA:CA ) (LSANF) is a Junior Miner in Chile’s Central Belt. The company is listed on Toronto Stock Exchange with a market capitalization of 500 million CAD.

The shortage of copper is becoming better understood as the demand for clean energy and infrastructure projects soars. Despite some short-term volatility in copper prices, everyone in the industry agrees that the dearth of new copper projects virtually guarantees higher prices for the foreseeable future, barring a global depression. The amount of capital chasing EVs, wind and solar projects, and related infrastructure supported by generous US, EU, and Chinese subsidies is accelerating. While the availability of capital for manufacturing batteries and other green energy-related projects has increased sharply, mining the metals remains the black sheep of the stock market with relatively minimal interest from investors.

That is about to change. Glencore’s aggressive approach to Teck Resources (it was reported that over a dozen miners and investors expressed interest in Teck’s copper operation), Lundin acquisition of Jose Maria, BHP’s investment in Filo Mining and talk of Barrick Gold's interest in copper tells us what the sharpest and best-informed minds with the deepest pockets in the industry think about the direction of copper demand, availability, and prices.

How do we find undiscovered gems that have multi- X appreciation potential? While there are projects in Africa, Mongolia, and other difficult jurisdictions, North America and Chile remain the safest jurisdictions. Although there has been a lot of noise concerning the relatively new administration of President Boric, the efforts of the radical part of his government have been unsuccessful. In fact, the crushing defeat in the recent constitutional referendum by conservative forces, coupled with fiscal needs, has led Boric to embrace the key contributor to Chilean prosperity – copper mining. Being seen with multinational mining executives, legislating a relatively revenue-neutral mining taxation law and restarting permitting has restored the traditional sharp contrast between Chile and the other Latin American jurisdictions.

While Ero Copper, Freeport McMoran, Tech Resources, and others are attractive investments as the shortage of red metal materializes, the most interesting upside is likely to be in the juniors that are ready to be discovered. While Filo Mining and NGEx have become relatively well understood and their potential recognized, we randomly stumbled on a potential hidden gem – Los Andes Copper.

While the company has been around for a while, potential catalysts are emerging as the Los Andes management dresses up the company as a partner for a larger mining company. The company has raised cash through the exercise of warrants and a royalty deal, announced a very promising Pre-Feasibility Study ((PFS)), and received permits to restart further drilling that many doubted was possible. Moreover, management has been gradually increasing the visibility of the company to highlight its appeal to a major looking to add resources in a well-understood basin that has outstanding infrastructure and geology.

Las Vizcachitas Pure Play

Los Andes Copper consolidated its 100% ownership of the Vizcachitas project in 2010 when it began work on geological modeling to understand porphyry deposits in the Central Belt of Chile. Drilling over the next decade confirmed the geological model, expanded the mineralization, and demonstrated the potential for further upside establishing Vizcachas as a tier 1 copper project. The key catalyst came with the PFS that was published in February 2023.

In the PFS, Los Andes published its maiden Proven and Probable Reserve Statement of 1.22 billion tons at 0.36% copper, 136ppm molybdenum, 1.1g/t silver equating to a copper equivalent (“CuEq”) grade of 0.41%. The study also took into account the drilling completed in 2021 and 2022. Measured & Indicated Resources increased 16% to 14.801 billion lbs CuEq and Inferred Resources increased 130% to 15.44 billion lbs CuEq.

Valuation

The table below calculates a target share price of 65 CAD vs the current share price of 17 CAD indicating a four-X multiple opportunity.

Conclusion

Los Andes is ready for prime time as the majors scramble for untapped copper in established jurisdictions. The management is strongly incentivized via 49% ownership and it is progressing well, catalyst by catalyst. Recently, the pace of announcements has accelerated and there are reasons to believe that more is coming. If you believe that there is a shortage of copper and you look for option value with a margin of safety, Los Andes is an appropriate size for a small-cap junior miner, maybe just the play.

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