Metalinvestor's  Instablog

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 (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.

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By Commodity Dispatch

In 2011, state-run Mexican oil giant Petróleos Mexicanos "Pemex" pumped an average of 2.5 million barrels of oil per day, down 25% from its 2004 total of 3.4 million barrels of oil. Mexico has vast reserves of oil but Pemex is losing the technology battle to multi-national companies like Royal Dutch Shell (RDS-A-NYSE), Exxon Mobile (XOM-NYSE) and BP (BP-NYSE).

An independent energy commission predicted that Mexico could become a net oil importer in the next decade if it cannot replace a drop in output from major oil fields with new discoveries. The commission observed that only 22% of Pemex's exploration projects were funded in 2011.

Mexican President-elect Enrique Pena Nieto has announced plans to open up Pemex to the private sector. Upgrades to the shipping fleet are expected to top $1 billion over the next three years. Pemex has asked the Mexican Congress to approve a $25 billion capital expenditure budget for 2013.

The mantra of partnership is already evident as BP recently announced an agreement to share technical information with Pemex pertaining to its deep-water well-capping equipment. Bechtel Hydrocarbon Technology has signed a $12.54 million deal to provide technical assistance in refining technologies and Pemex has adopted BMC Software's (BMC-NASDAQ) Business Service Management Program which standardizes infrastructure, applications and processes.

On November 5, 2012, NXT Energy Solutions (SFD-TSX.V) (NSFDF -OTCBB), an Airborne Survey Technology Company, received a $2.9 million progress payment from Pemex pursuant to its first contract with PEMEX signed on September 12, 2012.

Pemex's award of the contract was based on an extensive period of technical review, commercial review and validation and a test flight of NXT's patent pending technology.

The project had an initial value of $4.73 million, which was expanded to $5.8 million shortly after completion of preliminary SFD® data acquisition operations.

NXT Energy Solutions (SFD-TSX.V) has developed a patent pending Airborne Survey Technology, which significantly reduces the cost, time, risk and environmental footprint inherent with oil exploration.

SFD (Stress Field Detection) technology remotely identifies trapped reservoirs at the first stage of the exploration cycle. Airborne sensors detect orientation changes in the horizontal gravity field.

Competition for energy discoveries has driven companies to explore in hostile and environmentally sensitive locations where basic on-the-ground exploration is difficult, dangerous, and extremely costly.

With deep-water drilling rig rates around $400,000 per day, and the cost of a single well up to $100 million - it is vital for oil and gas companies to make good early decisions which is where SFD technology brings value for its clients.

Headline#1: Cost Of a Single Oil Well.

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Pemex spent $2.3 billion on exploration in 2011 so the contract with NXT Energy represents only 1/400th of their total annual spend. The SFD® project covers large offshore and onshore areas. An expanding role with Pemex could itself be a company-maker for NXT which has market capitalisation of $34 million.

Current annual global geophysical exploration spending is around $12 billion. NXT's partnership with Pemex is an important milestone for the company. If the relationship goes well, expect NXT to be signing new contracts with international oil and gas companies looking to gain a technological advantage.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

By Commodity Dispatch

A Bankable Feasibility Study (BFS) is an independently audited document that analyses all technical and financial risks before the construction of mine including: capital costs, grades, permits, taxation, cash flow, strip ratio, politics, water, power, labour, revenues, royalties, metallurgy, milling and transport.

A positive BFS is a green light to move the project to funding. The level of accuracy is +/- 15%.

Here are 5 projects with positive Bankable Feasibility Studies. They represent opportunities to invest in mature companies - a stone's throw from profitability.

Torex Gold (TXG-TSX) owns 100% of the Morelos Gold Project, located 200 kilometers southwest of Mexico City in the prolific Morelos Gold Belt. The project covers an area of 29,000 hectares of which more than 75% remain unexplored.

The strategy at Torex is to build a high grade open-pit mine which will generate cash to continue exploring additional high grade targets on the Morelos property.

In the last two years Torex has completed 100,000 meters of drilling, advanced government relations, gained community support, secured water rights, expanded M&I resource from 3 million to 5 million ounces and completed the Bankable Feasibility Study.

Torex has established dialogue with 11 core banks including export credit agencies. A high grade deposit with low cash costs create high margin project economics.

Construction at Morelos is anticipated to begin in Q2 2013. A four hour drive from Mexico City on paved roads, the project is accessible, close to a 115kV line and water supply. TXG is currently trading at $2.05 with a market capitalisation of $1.238 billion.

Northern Graphite (NGC-TSX.V) is developing the Bissett Creek property located in Southern Ontario Canada, 15 kilometers from the Trans-Canada highway. The Bankable Feasibility Study was completed in July, 2012. Mine permitting is expected to be completed in the 4Q/2012.

The BFS estimated a probable reserve of 19 million tonnes grading 1.89% Cg based on indicated resources only. Contemplated Life Of Mine is 23 years, producing 20,000 tonnes of graphite concentrate per year. NGC has another 50+ years of inferred resources and has just completed a 3,000m drill program to upgrade the inferred to indicated. This will enable higher grade inferred resources to replace lower grade indicated in the BFS and further enhance the economics of the project.

The waste to ore ratio is 0.50 and operating costs over the first five years of operation are $851/tonne of concentrate. Based on a weighted average price of $2,600 per tonne for the sizes and grades of graphite that will be produced, the pre-tax IRR is 23.1% and the NPV is $151 million (@8%). The capital cost of the mine is $102.9 million including a $9.4 million contingency. Bissett Creek will have the largest flake size and highest purity concentrates in the graphite industry, resulting in premium pricing.

Long term shareholder value is amplified by demand growth from China, India and other emerging economies, and from many new applications such as Li ion batteries, fuel cells, vanadium redox batteries and nuclear energy.

Currently 80% of world production comes from China and its production/exports are expected to decline. Northern Graphite is trading close to its 52-week low at .79 with a market capitalisation of $39 million.

Coalspur Mines (CPT-TSX) (CPL-ASX) controls 55,000 hectares of coal exploration leases in the Hinton region of Alberta, Canada - including the Vista Coal Project which contains 20km of continuous gently dipping strike length and a marketable reserve of over 313 million tonnes making it one of the largest undeveloped export-orientated thermal coal projects in North America.

The Bankable Feasibility Study defined a 30 year mine life producing 11.2 million tonnes a year of saleable coal from the processing of 20.4Mtpa of run of mine coal. Phase 1 envisaged production of 5 million tonnes per year at a capital cost of C$864 million. Phase 2 increased production by a further 6.2Mtpa utilizing free cash flow from Phase 1 to fund development.

Coalspur has access to first world infrastructure, being close to CN Rail's underutilized main line which connects to deep-water ports on Canada's west coast. Target markets for the coal are Pacific Rim countries, including China, Japan, and Korea. CPT has secured a port allocation agreement with Ridley Terminals entitling it to 11.7 million tonnes of port allocation for up to 21 years.

Since the release of their BFS Coalspur has increase the production capacity on Vista to 12.0Mtpa and projected development capital to achieve first production in 2015 has recently been reduced by $342 million to $527 million. Permit approvals for a 5 million tonne per year development are expected in Q1, 2013. Coalspur is currently trading at .98 with a market capitalisation of $602 millon.

Reservoir Capital (REO-TSX.V) is a renewable energy company with hydroelectric and geothermal projects in southeast Europe. The Flagship 59.2 MW Brodarevo Hydroelectric Project in Serbia is advancing towards construction.

Brodarevo is a run-of-river project, with minimal social and environmental impacts.

The Bankable Feasibility Study was completed in June 2012. A Bilateral Agreement between the Serbian and Italian Governments has annexed Brodarevo as a qualified project setting in place an incentivized renewable power export rate of €155/MWh.

REO is employing a proven technology that has been in use for over a century, enhanced by innovations around low impact run-of-river developments.

Grids love hydro because of its flexibility and predictability. The EU has mandated that 20% of its power will be renewable by 2020.

Italy is importing renewable energy from the Balkans via new subsea cables. REO is projecting €146m capital investment into one of the poorest regions of Serbia, the majority of which will be spent on local contractors, creating 1,000 jobs during the 5-year construction period.

Reservoir Capital is currently trading at .15 with a market capitalisation for $7.9 million.

4.) Minco Silver (MSV-TSX.V) is focused on the acquisition and development of the Fuwan Silver deposit in southeastern China.

The Fuwan Silver deposit has a reserve of 9.1 million tonnes averaging 189 g/t Ag, which will support a 3,000 tonne per day operation for 9.2 years. It has an excellent opportunity to expand its mine life along the relatively un-explored 10 km long Fuwan belt.

An important water-monitoring study authorized by Guangdong Province concluded that Minco is in compliance with the requirements of the new National Water Guidelines set out by the Ministry of Environmental Protection of China.

Minco Silver is now updating the Environmental Impact Assessment (EIA). Upon approval of the EIA, the Minco will finalize the preliminary mine design.

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Minco Silver has $68.1 Million Cash in the bank, with access to a $45 million line of credit at Industrial and Commercial Bank of China (ICBC). MSV has 157 million ounces of silver, in all three categories, (55 million probable reserve) an International Bankable Feasibility completed indicating 5.5 million ounces of production per annum at a cost of $5.65 per ounce, (3,000 tpd mill) with a CAPEX of USD$73.

The adjacent Xijiang River provides access to the South China Sea and international shipping. Minco has been approached by several construction companies in Guangzhou to purchase the waste rock material potentially reducing mining costs even further.

Minco Silver is fully financed, nearly fully permitted, with the company currently filing for its administrative EIA, which in China, triggers the mining permit. MSV is currently trading at $1.77 with a market capitalisation of $104 million.

A Bankable Feasibility Study transforms a company from a story to a rigorously tested model. Because BFSs are complex technical documents, investors tend gloss over them. For institutional funds with in-house analytical teams, the BFS is a bible and a crystal ball. It is the ultimate de-risker. Typically the volumes of institutional buying will increase during this phase.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.