Epstein-Research Blog | Nicola Mining, $51 Mm Invested In 4 Assets, Market Cap $6 Mm, Cash Flow Next Year | Talkmarkets - Page 3
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In 2011 Peter Epstein, CFA, left a $3 billion hedge fund where he was a senior natural resources analyst to help increase awareness of a number of natural resource companies in which he's invested in. 

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Nicola Mining, $51 Mm Invested In 4 Assets, Market Cap $6 Mm, Cash Flow Next Year

Date: Tuesday, November 10, 2015 9:31 AM EDT

Asset # 1: The Merritt Mill is fully operational, requiring no CAPEX to commence milling up to 300 Mt per day, “tpd.” We would  require roughly $150k in CAPEX to install equipment allowing us to utilize a back up crushing system. If installed, Nicola would be able to concurrently process mill feed from two sources. Depending on material, our break-even milling is $50 to $70/Mt. Our mining partners pay mining & transportation costs and a tailings disposal fee. We pay milling costs. Nicola sells the concentrate, with resulting profits split 50 / 50. 

A key component of our partnerships is that they are exclusive contracts. It`s truly a win / win. We unlock value of the miner’s properties by giving them an opportunity to monetize. Without Nicola, the miners would probably not be mining at all. We are their only outlet. We intend to share profits equally with our partners to ensure repeat business. It`s extremely difficult and costly to get a milling permit so we’re in a very advantageous position. Currently we have 3 partnership agreements in place; the first guarantees delivery 15 g/Mt gold, the second 1,306 g/Mt silver and the third, 7 g/Mt gold.

Screen Shot 2015-11-03 at 4.00.52 PM

Our third Mining and Milling Profit Share Agreement is with a company called Siwash, see press release. Siwash’s mine is low-cost as its main vein system outcrops at surface. Our partner has about 3,500 Mt stockpiled and is required to deliver a total of 6,500 Mt ending in 2nd Qtr of 2016. Siwash is applying for a 10,000 Mt sample permit, (~ 167 tpd over 60 days). Assuming we process our partner’s 6,500 Mt over the course of 60 days, that would equate to roughly 100 tpd, or 1/3 of Merritt Mill’s current capacity.

Asset # 2: Treasure Mountain, a former operating mine, has $460,000 of remaining costs to mine Level 1 Stope 2 and another $308,000 to ship mill feed to Merritt Mill. Proceeds from our 3 milling partnerships are expected to repay a portion of Waterton’s debt, fund exploration and bolster working capital. Nicola Mining owns 100% of Treasure Mountain’s silver deposit consisting of 51 mineral tenures, 21 legacy claims, 100 cell units and five crown grants totaling 2,850 hectares (7,043 acres). The Company maintains the option of reopening Level 1 to extract silver from Stope 2. However, given depressed silver prices, our near-term focus remains on exploring 3 prospective targets.

Asset # 3: Thule Copper has, without question, tremendous blue-sky potential. I don’t use the term, “blue-sky” lightly, Thule Copper was once the largest open pit copper mine in the world. Thule’s mining leases and rights comprise 20 mineral claims covering 8,457 hectares (20,898 acres), of which 10 claims are contiguous. Thule Copper is known to host mineralization in the form of copper-iron skarn and copper porphyry. It’s located 20 km south of Teck Resources’ Highland Valley Copperoperation, 10 km from Merritt, BC.

Asset #4: Industrial Soil. Our 4th asset was recently developed by Nicola Mining. It’s a portion of our property permitted to accept contaminated (industrial) soil. As mentioned, this asset and the utilization of the Merritt Mill, are the nearest-term cash flow opportunities. By 2h 2016, we expect to be cash flow positive. In the meantime, we don’t anticipate requiring equity capital, except for compelling, accretive acquisitions.

Screen Shot 2015-11-10 at 8.16.51 AM

Did Huldra Silver own all 4 assets? How much capital was deployed?

That’s a good question. Huldra Silver owned the Mill, Treasure Mountain and Thule Copper. Prior management spent a very considerable amount advancing these assets. As can be seen, a total of $51 million has been sunk into our assets. This is noteworthy given that our current market cap is just $6 million. A portion of the $51 million deployed was completed many years ago. In today’s dollars, the cost of replicating these expenditures would be meaningfully greater.

Total historical investment:

Screen Shot 2015-11-09 at 5.07.51 PM

Please explain near and intermediate-term catalysts to watch for

There are several important catalysts to watch for, milling operations, M&A, possible non-core asset sale and industrial soil handling. Milling of miner partnerships’ ore is expected to commence by the 2nd Qtr 2016. Given the distress in the mining industry, we expect very attractive and accretive M&A opportunities. We are reviewing a couple now. We have a contract in place to accept up to 300,000 Mt of industrial sand per year at $6.0/Mt of net revenue to Nicola. We have an offer for a non-core property listed for $2.5 million.

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