Exclusive Interview: One of the Best Junior Miner Deals

Written by Gerardo Del Real
Posted January 28, 2019

Commodity stocks are firing up and I want to bring your attention to one of the best companies in the sector.

Kutcho Copper negotiated one of the best deals in recent memory in the junior space with partner Wheaton Precious Metals. Despite the partnership, the execution in 2018, and a great anchor asset, the company is trading closer to 52-week lows than 52-week highs.

With multiple near-term catalysts on the horizon and hopefully a better 2019 in the junior space, Kutcho is poised for a breakout year.

I talked with President and CEO of Kutcho Copper (TSX-V: KC) (OTC: KCCFF) Mr. Vince Sorace, and I've got the full transcript for you today.

To your wealth,

gerardo-sig

Gerardo Del Real
Editor, Junior Mining Monthly and Junior Mining Trader


Gerardo Del Real: This is Gerardo Del Real with Junior Mining Monthly. Joining me today is the President and CEO of Kutcho Copper (TSX-V: KC)(OTC: KCCFF), Mr. Vince Sorace. Vince, how are you?

Vince Sorace: Doing great, Gerardo. Thanks for having me.

Gerardo Del Real: Thanks for taking the time. It's been a little bit since we had a chance to get an update. We all know that 2018 was a tough, tough year for any of us in the resource space, very few exceptions. 2019, however, is a year I am optimistic about. One of the companies that I am most optimistic about is Kutcho Copper.

I started by saying it's been a little bit since we chatted. I would love for you — for people that are new to the story, because I know the resource space is attracting some new blood — I would love for you to remind us what attracted you to purchase the flagship Kutcho deposit? Can you describe it a bit for people that may be new to the Kutcho story?

Vince Sorace: Sure. When we were out looking for a project to acquire, we saw a number of opportunities in Kutcho. The first thing that caught our attention and what should catch any investor's attention to a project was grade. Kutcho sports 2% copper, or just under 3% copper equivalent. That's hard to ignore. You got to pay attention to that. For Kutcho, as we took a deeper look what we saw was opportunity to significantly scale the size of the project.

With that we also saw the potential for a high-margin project with low capital requirements. That's important these days. These big copper projects that are looking at $1 billion or $2 billion builds, they're not in favor these days. It's these lower sub-$300, $400 million builds that people are paying attention to, and those are the ones getting financed.

The last point with respect to Kutcho, there's a very clear path forward with respect to feasibility study and permitting and getting this thing into production. So that was what attracted us initially to it. That’s what we've been working on since we acquired it.

Gerardo Del Real: You touched on the feasibility study and, again, I want to provide some context for people that don't have it. You currently have a market cap of sub-$18 million Canadian.

You have a 2017 pre-feasibility study that showed an after-tax NPV of $265 million Canadian with an IRR of 27.6%. A lot of runway between $18 million and $265 million.

You mentioned the feasibility study. When can we expect that to be published? I know you're probably in the process of wrapping that up. Am I accurate in that?

Vince Sorace: Yes. The strategy for us since we acquired this project — and that's only just over a year ago — was to get back into the field and it was the quickest timeline to complete feasibility, permitting, and production. Last year, through 2018, we probably spent around $15, $16 million in the field. That was to capture all the data required to complete the feasibility study. Everything from geotechnical and metallurgical drilling and resource expansion drilling, and we also recommenced our baseline studies.

All that happened in 2018, and it was a very successful field season. We did everything we needed to do. We did it on budget. All that feeds into completing the feasibility study, which is probably six months away from completing that.

We also made significant advancements with respect to — and this is very important — our First Nations partners on the project. We established, over the course of 2018, great relationships. Both First Nation partners are pro-mining and would like to see this project succeed alongside us.

Gerardo Del Real: Excellent, and that's important. Can you talk to people about who's running that community relations aspect with the First Nations? Because it's so critical.

Vince Sorace: Yeah, we've got a great team here spearheaded by Sue Craig. Sue has permitted two projects in BC, Galore Creek and Kemess Underground. She's got a ton of experience in doing this. Like I said, right in our own province she's permitted two projects. She's doing a great job.

Gerardo Del Real: Fantastic. You had a very successful 2018 execution-wise. What can we expect as far as near-to-mid-term catalysts in 2019?

Vince Sorace: Because of all the work we did last year, that's going to be kind of feeding into the completion of the feasibility study, there's some key components that come out of that. One of them is an updated resource estimate. As I mentioned last year, we did drilling to expand the size of the project. In probably the next two to three weeks, you're going to see us publish an updated resource estimate. We will have the results of our metallurgical studies. That will be coming out, again, in the next probably three weeks or so.

We will be filing our project description, which is the first step to entering into the EA the permitting process.

These are significant milestones that all feed into the feasibility study. We'll be publishing them in the coming, say, weeks to month. People can see what we have and what the results of work in the field were.

Gerardo Del Real: Before I let you go, Vince, I got to get your take on copper. It's my favorite way to play the electrification of everything. I think near- to mid-term and, frankly, the long-term, we're in for a treat as far as the copper price goes. You have leveraged exposure, obviously, to copper. What are your thoughts on copper today? Where do you see it a year from now?

Vince Sorace: I like copper. I think copper is going to be north of $3. I got to tell you, personally, I haven't talked to an analyst, a strategic, a corporate, or I haven't seen any data that doesn't support increasing demand, but more importantly, a deficit on the supply side growing through 2020. Those fundamentals make for higher copper prices. People are hearing a lot of noise out there right now with respect to global economic slowdown, but that's been predicated with what's happening in the China and the U.S. trade wars. I think what we've seen in the last three weeks, it looks like it's starting to mitigate itself. It looks like they're trying to find a solution. I think they're going to come to a solution. And I could be wrong on this, but I think that when they resolve these trade war differences, I think that's going to be one of the first catalysts. I think copper's got a chance at popping on the heels of that.

Gerardo Del Real: Vince, you have grade, you have a scale, you have exploration upside, you have a lot of runway between, again, the $265 million net present value outlined in the pre-feasibility study and the $18 million market cap. Now you have the support with one of the best in the business with Wheaton Precious Metals. I'm looking forward to the rest of 2019. I'm biased. I'm a shareholder. I'll likely be adding in the open market, so full disclosure there. I eat my own cooking.

Vince, anything else? Thank you so much for the update. Anything else that you'd like to add?

Vince Sorace: No. I think 2019 is going to be a good year for us, and a good year with respect to specific things that can help re-rate the stock and add value to the company. Keep your eyes out for it. I think it'll be an exciting year.

Gerardo Del Real: Vince, thanks again.

Vince Sorace: Thank you.


For the past decade, Gerardo Del Real has worked behind the scenes providing research, due diligence, and advice to large institutional players, fund managers, newsletter writers, and some of the most active high-net-worth investors in the resource space. Now, he is bringing his extensive experience to the public through Outsider Club, Junior Mining Monthly, and Junior Mining Trader. For more about Gerardo, check out his editor page.

*Follow Outsider Club on Facebook and Twitter.

Comments

Investing in Marijuana Without Getting Burned