Copperstone Resources: Resource upgrade de-risks Viscaria estimates - ABG

Environmental permit timeline progressing as planned

Resource upgrade: measured copper +43% to 346kt

Fair value range raised to SEK 1.2-2.6 per share

Company expects environmental permit in mid-2023
Copperstone reported a sequential decline in exploration expenditures to SEK 39m (46m in Q2’22), which together with total opex of SEK 42m resulted in EBIT of SEK -3m. Several important milestones were reached during the quarter, including handing in completion documents for the environmental permit for Viscaria, which the company still expects to secure by mid-2023. Also, Henrik Ager, previously head of Sandvik Mining & Rock Solutions, was appointed new CEO, and will replace Anna Tyni by year-end, who will instead take on the role of CEO at the subsidiary Copperstone Viscaria AB. Finally, after the quarter ended, Copperstone completed a directed rights issue of SEK 235m, further strengthening the balance sheet ahead of a capex-heavy period once the company receives its environmental permit.

Measured copper up by 43% to 346kt (previously 242kt)
Copperstone also announced a substantial mineral resource upgrade for the Viscaria mine (see the full updated resource portfolio on page 3). Measured copper resources now amount to 346kt (+43%), while the total measured and indicated resources are now 639kt (+23%). At the proposed 30ktpa run-rate of the Viscaria mine, the new measured resources more than cover the company’s initial 10-year LoM plan.

Impact on valuation from resource upgrade
We currently value the Viscaria mine using a DCF approach, outlining three scenarios where we assume 10, 15 and 20 years’ LoM for the asset. On the new mineral resource upgrade, we make no changes to our underlying estimates. However, given the significant increase in measured resources and the fact that the project timeline so far is progressing according to plan, we argue that our estimates are somewhat de-risked, and we raise our fair value range to SEK 1.2-2.6. With that said, there are still ...
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