Freeport Resources: NPV 10 = 100 Times Market Cap

Freeport Resources  (TSXV: FRI) (OTCQB: FEERF) (FSE: 4XH) ranks among the top listed copper developers in the world and with an NPV (10%) equivalent to 100 times the current market capitalization, SGL believes that it is one of the best call options on the price of copper in the junior sector.

April 30, 2024

The Ultimate Copper Call Option

Investing is never simple.

It is not only about minimizing risk. It is not only about dreaming of pie in the sky returns. The key is assessing the complex risk-reward characteristic of a speculation!

Freeport Resources (TSXV: FRI) (OTCQB: FEERF) (FSE: 4XH) ranks in the top 10 listed copper developers in the world with a resource of 6.8 billion pounds of copper.

Their Yandera copper project has a net present value of about 100 times its current market capitalization.

Thus the equation : NPV (10%) = 100 x MC.

When an investor is only paying copper in the ground $0.003, one can afford some Papua New Guinea political uncertainly as well as marketing and development risk.

 Especially when the company has cash, a completed pre-feasibility study and great management!

Papua New Guinea Politics

There certainly is political risk in developing a mine in Papua New Guinea.
One of the reasons why Freeport Resources is trading near its lows has certainly a lot to do with the fact that it needed to renew its exploration license. This has now been achieved, so the stock could revalue quite a bit as the market recognizes that this important hurdle has been overcome.

It is often said that it is better to invest alongside Mark Bristow, the CEO of Barrick, in Congo or with the Lundin Family in Ecuador, than with incompetent operators in so-called safer but often overrated jurisdictions like Canada or the USA. Although these jurisdictions are considered to be stable, permitting risk and the possibility of extraordinary permitting delays are always possible.

Papua New Guinea is Elephant Country

Freeport Resources’ project is located on the New Guinea orogenic belt.

Papua New Guinea host many profitable mines operated by world class companies.
Seven huge copper mines operate in this country. Its project is close to Kainantu operated by K92.

For example, Freeport-McMoran with their Grasberg mine in Indonesia, or Newmont and Harmony jointly developing the Wafi Golpu mine, and Barrick, with the Porgera mine, are all active in the country. This shows that the geology is so prospective that political risk is offset by the reward of operating these mines.

In 2023, two major mining projects were permitted, which shows again that Papua New Guinea, although a challenging jurisdiction, is still open for business.

The World Class Yandera Copper Project

The overall resource at 0.15% copper cut off shows 959,000,000 tons grading 0.37% Copper equivalent.

Because 50 million tons starts to be a workable project in the copper space, this is simply huge resource.

Additionally, because overall grade of copper mines are around 0.40% Copper, this indicates that this resource is of sufficient grade to be developed.

More than US$200 million has been spent on this project, essentially by Sentient, the well-known private equity group. Unfortunately, for them they had to liquidate their fund and lost the property.
SRK Consulting updated the Yandera Project’s 43-101 resource estimate in December 2016.

In November 2017, Worley Parsons published an independent pre-feasibility study showing an initial capital cost of $930 million with a post-tax NPV at 10% of 1.038 billion dollars with an internal rate return of 23.5%. This study was made at much lower copper prices, but on the other hand the cost increases have also been substantial.

Top Management With Previous Success

CEO Gord Friesen is a very successful entrepreneur. He is positioning Freeport Resources for the coming bull run in copper.

Freeport Resources bought this huge Yandera copper project for practically nothing and wants to advance it while capitalising on the coming red metal euphoria. Moreover, the two principal shareholders, Micheal Beck and Stephen Dattels (each holding 9.9%) were also the cofounders of Uramin. Here they followed the same strategy buying on the cheap a big resource and riding the wave of a bull market in the underlying commodity.

Bottom Line: An Attractive Entry Point Under 10 Cents

Given the scale of the resource, FRI poses an attractive entry point under 10 cents. (The stock is currently trading at CAD 5 cents.)

Yes, there is political risk in Papua New Guinea.

Yes, a copper equivalent grade of 0.39% might be a bit low for this jurisdiction.

Yes, an eventual recession might delay the big price increases of copper. But the company is financed for now since it will be closing a friends and family private placement in the next couple of days.

(The raise is at five cents with a half warrant at CAD$.25.)

With 181 million shares outstanding before the recent small financing, the market capitalisation of Freeport Resources is only around 10 million Canadian dollars.

Considering the outstanding management team, a massive resource and a bull market in copper, the risk reward for this company seems difficult to beat.

Will Freeport Resources reveal itself to be the ultimate call on copper? We shall see!

Disclaimer: SGL does not provide investment advice and is not a registered investment advisor. Always do your own due diligence before making an investment. Investing in securities, especially junior miners, can be risky and never invest money you cannot afford to lose. SGL cannot guarantee the accuracy of the information in this post. SGL has attempted to present the information fairly, but it or its contributors may own shares of Freeport Resources so bias cannot be excluded. SGL and its contributors have no relationship with Freeport Resources. SGL or its contributors may buy or sell shares at any time.

SGL makes no representations, and specifically disclaims all warranties, express, implied, or statutory, regarding the accuracy, timeliness, or completeness of any material on this website. You should seek the advice of a securities professional regarding any stock transactions. SGL cannot guarantee in any way that it is providing all of the information that may be available. Please do your own due diligence before buying or selling any security.

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