- Cornerstone Capital Resources Inc. (“CGP”, “company”) is a mineral prospect generator, with a diversified portfolio of projects in Ecuador and Chile.
- Its flagship asset is a 22.2% interest in the world-class Cascabel copper-gold project in Ecuador, through a 15% direct interest and an 8.5% equity interest in SolGold plc (LSE: SOLG / market capitalization of $449 million). SOLG, which holds an 85% interest, is Cascabel’s operator. CGP has a financed carried interest to bankable feasibility study.
- A November 2018 resource estimate on Cascabel returned an indicated resource of 18.5 Blbs of copper (0.41%) and 19.4 Moz gold (0.29 gpt), and an inferred resource of 5.5 Blbs copper (0.27%) and 3.8 Moz gold (0.13 gpt) – making it one of the largest undeveloped projects in the world.
- A May 2019 Preliminary Economic Assessment (“PEA”) returned an After Tax – Net Present Value (“AT-NPV”) at 8% of US$4.35 billion, with an After Tax – Internal Rate of Return (“AT-IRR”) of 26%, at US$1,300 per oz gold and US$3 per lb copper. CGP’s direct 15% interest in the project implies an AT-NPV of C$817 million; CGP’s current enterprise value is just C$10 million.
- We believe Cascabel’s massive tonnage and robust economics make it an attractive acquisition target for the majors. BHP (ASX: BHP) owns 14.7%, and Newcrest Mining (ASX: NCM) owns 14.6% of SOLG. In 2016, BHP made an offer to farm-in to a significant share of SOLG’s interest in the project, which SOLG rejected. In January 2019, SolGold announced an intention to make an unsolicited offer on CGP’s shares, which was never formalized.
- Based on 100% of the indicated resource and 50% of the inferred resource, we estimate that CGP is trading at $0.002 per Copper Equivalent (“CuEq”) versus SOLG’s $0.016 per lb. CGP’s Enterprise Value (“EV’) is just 1% of the AT-NAV at 7%, while SOLG’s EV is 7%. Therefore, the market is valuing CGP’s shares at a significantly lower multiple than SOLG’s shares, even though both companies have the same underlying asset.
- Management, board and institutions own over 50% of CGP’s shares.
- The value of the company is highly dependent on copper and gold prices.
- Ecuador is a relatively new mining jurisdiction.
- Geopolitical risks.
- Lower grade / high CAPEX projects are currently out of favor.
- Development risks.
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