Whenever a company comes out with a PEA I always look at the CAPEX first. The fact is that, regardless of the size of the resource, the estimated mine life or the internal rate of return, the CAPEX number gives a good first approximation of whether a project is actually feasible.
513 Million dollars is the CAPEX of Crown Mining’s (V.CWM) Moonlight Copper Project located in Plumas County, California. A big number but relatively minimal in the context of copper mine CAPEXs which often run over 1.5 billion and up.
In the release, Crown’s President & CEO, Stephen Dunn stated, “The Company is very encouraged with the results of the PEA as they support the concept that the Moonlight Project can be developed as a profitable mining operation at current copper prices. The current study only focuses on the Moonlight deposit and does not factor in the other two deposits or the several untested exploration targets on our property. Additional exploration success at Moonlight and the inclusion of these other deposits could have a significant influence on the size, value and timing of the overall development plan as we move forward.”
Speaking with Dunn, a bit of the background of the surprisingly low CAPEX emerged. “A lot of the infrastructure is already available at the property,” said Dunn. “Roads, power, water are all in place and those are expensive if you have to build them. The terrain itself is also very favourable and the deposit is right at surface which means that the strip ratio is quite low. That, plus the positive metallurgy that we reported in January, makes for a very economic operation at today’s copper prices. But, from the investor perspective, the word “California” with all of its regulatory and environmental implications is sometimes mentioned as bit of a drawback. Dunn thinks it shouldn’t be.
“This is a very mining friendly part of the state, said Dunn. “And in California, the county is the lead agency in the permitting process. The election of Trump has also helped on both the regulatory and on the tax front.”
Dunn is not shy about the plan for the property. “This is an option on copper. It makes economic sense at the present price of copper. By doing the PEA we’ve shown that the project makes economic sense and should be looked at.”
“When we have tried to talk to the majors in thepast theyy all wanted better data. With this PEA and new and updated block models and metallurgy, we should be able to attract their attention now.
With a 513 million dollar CAPEX even a smaller producer could take on the Crown Mining Midnight Copper Project. At $3.50 copper it would be attractive economically, but if, as many think it will, copper heads up towards $4.00 the project and the company will look like a screaming deal.
Investors look at the market cap rather than the projected CAPEX and here Dunn has done a very good job avoiding dilution of the Crown Mining shares. Even after the company’s last raise it only has 39 million shares outstanding. Those are trading at $0.25 so the market cap remains under 10 million dollars. The shares are fairly closely held and even a glimmer of interest from an acquiring company could send the shares higher. Much higher.
So could a rise in the price of copper.
But while Crown waits for an offer or a price rise, or both, Dunn is not standing still. “This initial PEA is very conservative. It has a 71 million dollar contingency built into the CAPEX. It does not include gold credits and it treats the oxide as waste. With a small drill program we should be able to substantially improve on the economics of our PEA, so We’ll probably do a revision in a year.”
Simply having the PEA on one of the multiple deposits on the Crown Mining land is an important first step. It underscores where work is needed and where savings can be found. It derisks the project overall. Most importantly, it gives Crown Mining the hard data any acquiring company needs to be able to see.
James West at the Midas Letter made a great video about Crown Mining and copper: