Value Investing Oroco Resource Corp TSXV: OCO |
| Posted: 04 Jul 2020 11:10 AM PDT Oroco Resource Corp. TSXV: OCO.v OTC: ORRCF Note: This company has been evaluated very thoroughly by others. I am relying heavily on work done by others and linking to this work. I'm not writing a full analysis, just wanted to share an idea. What is Oroco? Oroco Resource Corp is a junior mining company based in Canada with majority interest in the Santo Tomas Mine. This is a large Copper porphyry deposit located in Mexico. Junior miners are usually a good way to throw away money, so why is this one different? Santo Tomas has proven reserves. This is not common. It was drilled decades ago and samples have been re-assayed multiple times as the mine has gone through various ownership. A typical junior miner needs to prove their reserves. Why does the opportunity exist? Many of the world's desirable copper assets have been developed or acquired by major mining companies in the last two decades. During this time Santo Tomas had been in legal dispute. This is now resolved and Oroco has received majority interest in the project and the mine is registered to a subsidiary. The second reason is that the information we have on the mine is historical. This means it does not comply with current standards. Once a compliant drilling study (43-101) is complete, the mine will be marketable. What am I actually buying? The company has a detailed Santo Tomas technical report published on their website: https://orocoresourcecorp.com/wp-content/uploads/ST-DAB-2019Aug22-Revised-2020Apr21-Final-red.pdf A few highlights from this report…
What is worth? Caesar's report did a nice NPV model: https://caesarsreport.com/freereports/CaesarsReport_2019-09-18.pdf At $2.75 copper, they estimate $1.25 billion NPV. At $3 copper, $1.66 billion NPV. These are estimates based on historical data of course. What's next? Continued development of the resource. The company recently finished a private placement. These funds are being used to complete a 3D-IP study of the mine. This data will help characterize existing known deposits and guide future drilling. Drilling will require a further capital raise and be the next step. The company will be most marketable at this point. Pros? The company trades for $82M CAD. NPV of the mine is at least $1.2B. Reserves are clearly under-evaluated. New land acquired and existing holes were not drilled to sufficient depth. Copper is a long-term play. This mine could last 40 years. Santo Tomas is close to infrastructure (rail and deep water port). It is in a developed mining district and the country has an incentive to keep this area safe/developed. Cons? The mine is in Sinaloa, Mexico. No reported incidents thus far, but security risk exists. AMLO has a populist bent and this creates some political risk. Reserves need to be proven. Although we have the benefit of previous drilling. Any thoughts are appreciated. A full write up of this company would be extremely long and technical. If interested, Mariusz Skonieczny has done some great work on Oroco over the last couple of years. I recommend starting with his website or his videos on the subject: http://classicvalueinvestors.com/2020/06/16/oroco-part-1-how-i-learned-about-santo-tomas-copper/ [link] [comments]  |
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