By Metal Guru
Catalyst Copper (CCY-TSX.V) recently announced an updated Measured plus Indicated (M&I) Resource of 3.7 billion lbs of copper; 446,000 oz of gold and 31.7 million oz of silver at the La Verde copper project in Michoacán State, México.
When CCY optioned the Mexican property in 2010, there was a non NI 43-101 compliant resource with insufficient data to include any gold or silver credits.
The core from historic drilling had been destroyed so Catalyst began by twinning sufficient holes to bring the resource to NI 43-101 compliant standards.
The Gold and Silver credits alone are worth $1.7 billion at today's spot prices.
In addition, Inferred Mineral Resources at La Verde are currently estimated to contain 2.7 billion lbs of copper; 250,000 oz of gold; and 21.0 million oz of silver.
La Verde consists of two proximal deposits referred to as East Hill and West Hill. The deposits are amenable to low-cost open-pit mining methods and are located in an area of excellent infrastructure; rail, power, water and highways all cross the property.
A Preliminary Economic Assessment (PEA) of La Verde is expected to be completed during 2012.
Catalyst has now completed more than 30,000 meters of drilling and 200 kilometers of geophysics (NYSE:IP).
"Catalyst is very pleased with the updated resources at La Verde," confirms Terry Hodson, V.P. of Exploration. "We can now complete our Initial Economic Assessment."
Despite the aggressive drilling program, and a rapidly growing 43-101 resource, Catalyst's market cap is only $16.4 million. The M&I copper resource is valued at less than a penny a pound. In fact, the M&I gold alone is valued at only $3.60 an ounce.
Valuations like this are often indicative of political instability, lack of infrastructure or fervent environmental opposition, but none of these factors are in play here.
Catalyst has been sold off because it is not completely in control of its own destiny.
La Verde property is subject to an option agreement with Teck Resources (TCK-NYSE) whereby Catalyst's may earn a 60% interest in La Verde by making $10 million in exploration expenditures by December 31, 2012.
"We've already spent about $11 million, subject to Teck review and agreement on the 2012 expenditures" explains CEO John Greenslade, "thereby earning the 60% interest in the La Verde. Very soon we are going to deliver Teck a technical summary of the work we've done, and an accounting of the money we've spent. Then Teck has 60 days to make a decision."
If Teck elects to exercise the "back-in right" to the project, they must spend $20 million in the next 3 years to increase their stake from 40% to 60%.
"If Teck decides not to exercise their back-in right, then we have 60 days to buy their 40% interest for $20 million," states Greenslade, "With the market in the state it is now, I have no desire to dilute the company, so we'll probably take on a partner. We're currently talking to various potential parties."
China imported 321,000 tonnes of copper in October, 2010. The urbanisation of China will be a main driver of copper demand for the next 40 years. "I've been meeting with senior decision-makers in China capable of closing deals," states Greenslade, "They're serious investors, looking for assets who understand the geology and the numbers".
The market does not like uncertainty, but with or without Teck - the La Verde project appears destined to become a mine.
With a Chinese strategic partner, and a completed PEA, Catalyst (if it remains Operator) will continue to expand the resource while initiating an "all seasons" environmental study - which is precursor to preparing an Environmental Impact Manifest.
If Teck backs in, CCY has a fully funded $20 million exploration budget with zero dilution.
"We have a world class asset in a very good area" states Greenslade, "In Mexico, once you have the Environmental Impact Manifest, all the other permits flow from that. From then on it's basically procedural. All environmental permitting in Mexico is done to World Bank Standards."
Power, rail and water cross the property the La Verde property. Lazaro Cardenas, Mexico's third largest port on the coast of the Pacific Ocean is 180 km from the site.
With 3.7 billion lbs of M&I copper; 446,000 oz of gold and 31.7 million oz of silver in a mining-friendly district of Mexico, CCY is no longer a story. It's an asset.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.