Arizona Sonoran

I have exited both of these names. I sold ASCU simply because of the price appreciation that it has seen, even though there might be more upside in it. I sold FOM around $7 a little before Eldorado Gold made its takeover bid for the company. Both names were great to me and I will remember them fondly, but I think I can do better moving to names that haven't grown up quite as much. If I was still holding them today I would probably still exit them given my affinity for cash these days. Both stocks were very good to us and we thank them for it!

No change in view here on either of these. I still like them both, but have cut the positions in half on their recent spikes higher. It's not that I don't like them anymore, it's just that they've had huge moves and I'm taking my foot off the gas a little. FOM will be in production this year making it a rare bird in the sector and ASCU is cashed up and will continue to advance its project until (I think) someone buys it.

This has been performing beautifully and is probably one of the most attractive copper acquisition targets in the U.S. With a global resource of around 11 billion pounds of contained copper, ASCU's Cactus project is big enough for anyone to take a run at – and it's probably just a matter of time until someone does.

No change in view here. Things are progressing as I like. ASCU is cashed up and will continue to advance its project until (I think) someone buys it.

ASCU is one of the most advanced, and largely under the radar, copper development assets in the United States — specifically Arizona. This is what is called a "brownfields" project… a project located in an area of previous mining operations. ASCU's Cactus project has a total resource of some 11 billion pounds of contained copper, which makes it big enough to be of interest to even the largest mining companies globally… and not only does it have scale, but it also has access to water, power, roads/railways, a local workforce, and local community support; all of which are critical to actually building and operating a mine. A pre-feasibility study (PFS) detailing the project development details and economics is due before the end of the year (i.e., soon) and a construction decision is expected by the end of 2026. ASCU is kind of boring, which is partly why it trades at the lower end of the valuation range relative to its peers, but therein lies the opportunity in my mind. The story isn't as well followed as other development projects out there, but that's also part of the thesis here… things are cheaper when they aren't widely followed. With undeniable scale, strong indicative economics, quality logistics, and a strategic location in the U.S., I think that ASCU is a must-own for anyone wanting long-term exposure to copper. This is the kind of asset that large mining companies love and eventually I think that's where this will end up — in the hands of a larger company that can buy ASCU and bring the Cactus project into production before the end of the decade. Sometimes boring is good and in ASCU's case I think that rings true. I've added stock as high as $3.30, so I obviously still like this one at current levels.

Update: I wish that we'd launched one day earlier, because this morning ASCU released the results of its pre-feasibility study on the Cactus project and it did not disappoint. With a capex spend of US$977 million, the project returns an after-tax NPV8 of US$2.3 billion. More importantly, the company highlighted that the project would return US$7.1 billion (after-tax) of free cash flow over the 22 year life of the project. Those numbers are based on US$4.25/lb copper (current prices are ~US$5/lb), and remember that they are in U.S. dollars. Those are some great numbers for a project of this scale… and they get even better at US$5/lb spot copper prices which you can read for yourselves in the news release. To put the free cash flow in context… imagine you are 30 years old and have $10 million. If I told you that if you gave me the $10 million, and that by the time you were 40, I'd have paid you $39 million (rising to $72.5 million by the time you were 52), would you take that trade? It implies a 14.5% CAGR (compound annual growth rate) for the first 10 years on your money, and a 9.4% CAGR over the whole 22-year project life – and that's at a long-term price that is pretty conservative in light of long-term fundamentals (large mines are depleting and new mines are lower grade and harder and harder (and more expensive) to permit and build). So, with ASCU up 11% to $3.46 as I type this, would I still add to my position? The market cap is ~CDN$600 million. A project like this would typically trade at around 0.6-0.7x NPV in the market, ignoring any "made in the USA" premium… it currently trades at about a third of that, so yeah, I'd add to it if my size wasn't already appropriate.