{"id":103141,"date":"2017-03-09T18:09:15","date_gmt":"2017-03-09T23:09:15","guid":{"rendered":"http:\/\/countingpips.com\/?p=103141"},"modified":"2017-03-09T18:09:15","modified_gmt":"2017-03-09T23:09:15","slug":"nicola-mining-3-juniors-in-1-copper-gold-silver","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2017\/03\/nicola-mining-3-juniors-in-1-copper-gold-silver\/","title":{"rendered":"Nicola Mining 3 Juniors in 1? #Copper #Gold #Silver"},"content":{"rendered":"
March 9, 2017<\/div>
\r\n<\/div><\/div>

By\u00a0<\/strong>Peter Epstein, CFA, MBA \u00a0\u00a0epstein.peter4@gmail.com<\/a>\u00a0\u00a0\u00a0http:\/\/EpsteinResearch.com<\/a><\/b><\/p>\n

\n

\"\"<\/p>\n

Nicola Mining Inc.<\/strong> (TSX-V: NIM)\u00a0\/ (OTC: HUSIF) has three primary, potential company-making assets, two nearing high-margin, steady-state cash flow.\u00a0 The third,\u00a0Treasure Mountain<\/a>,\u00a0offers both a shovel ready, up to C$9 million profit opportunity (see below<\/em>)\u00a0plus,\u00a0longer term, a potential company-making silver-lead-zinc mine on a past-producing mine site.\u00a0 Regarding the first two assets, there\u2019s the valuable, (virtually\u00a0impossible to replicate in BC<\/em>) gold-silver\u00a0Merritt Mill<\/a>\u00a0and processing facility centrally located near Merritt, BC, and an \u201cExploration & Material Purchase Agreement<\/em>\u201d with\u00a0Teck Resources\u00a0(NYSE: TECK) \/ (TSX: TCK)\u00a0to monetize waste rock from Nicola\u2019s 100% owned\u00a0Thule Copper<\/a>\u00a0project\u00a0(another potential company-maker<\/em>).\u00a0\u00a0NOTE: {Please see March 8th\u00a0<\/em>Corporate presentation video<\/a><\/em>}.<\/p>\n

Valuable Cash Flowing & Exploration \/ Development Assets<\/strong><\/h3>\n

\"\"<\/p>\n

Merritt Mill in BC, Canada<\/strong><\/h3>\n

At current 200 tpd capacity, grade assumptions and precious metal prices, the Mill should be good for about ~$2.3 million in operating income\u00a0this year. \u00a0NOTE: \u00a0(based on publicly available information, including data from peer toll milling operations<\/em>).\u00a0 Add an additional ~$2.5 million\/yr from the\u00a0Teck Material Purchase Agreement<\/em>\u00a0from 2018 on.\u00a0 Combined, Nicola\u2019s sitting on two assets that could generate ~$5 million next year, with considerable upside from higher grade ore, higher spot prices and expanded Mill capacity.<\/p>\n

Below is an estimate of what (I think) the milling operations could look like\u00a0in 2017.\u00a0 This is an indicative model, a composite of various milling & profit share agreements, based on Company press releases.<\/p>\n

\"\"<\/p>\n

All else equal, if the Company were to process 20% higher grade ore (from some of the profit sharing agreements<\/em>), cash flow would grow from ~$2.3 to ~$4.2 million.\u00a0 In a scenario with 10% higher spot prices, Nicola\u2019s share of operating profits would be ~$6.0 million, with more upside from ramping up throughput.\u00a0 Adding ~$2.5 million from the Teck waste material deal approaches ~$8.5 million in company-wide cash flow from 2018 on. \u00a0NOTE: \u00a0{this is not a forecast by me or the Company and does not contemplate the potential for increased throughput<\/em>}.<\/p>\n

Both earnings streams are high quality and expected to be long-lived, attributes that typically command strong market multiples.\u00a0 For example, precious metal streaming companies\u00a0Franco-Nevada (NYSE: FNV)\u00a0and\u00a0Silver Wheaton (NYSE: SLW)\u00a0trade at an average 20x Enterprise Value (\u201cEV\u201d) to EBITDA.\u00a0 Unlike FNV and SLW, Nicola has $77 million in tax credits, shielding it from paying cash taxes for years to come.\u00a0 The following chart shows implied share prices across various EBITDA and market multiple scenarios.\u00a0 Nicola Mining is currently at $0.22\/share, (down 25% from $0.29 on February 17th<\/em>).<\/p>\n

\"\"<\/p>\n

Thule Copper Project<\/strong><\/h3>\n

Nicola has achieved the elusive dream of most junior mining companies, positive cash flow to meaningfully self-fund exploration.\u00a0 Even better, both exploration projects are on past producing sites.\u00a0 They could be, yes I\u2019ll say it again,\u00a0company makers.\u00a0 Past production on Nicola\u2019s\u00a0Thule Copper\u00a0property featured\u00a0Craigmont, the largest open-pit copper mine in North America at the time.\u00a0 It operated at\u00a01.28% Cu\u00a0open pit, and closer to\u00a02% Cu\u00a0underground.<\/p>

\r\n
\r\n

Free Reports:<\/p><\/div>\r\n

\r\n

<\/a>\r\n\t Get Our Free Metatrader 4 Indicators<\/u><\/b><\/a> - Put Our Free MetaTrader 4 Custom Indicators on your charts when you join our Weekly Newsletter<\/p>

\r\n
\r\n
\r\n

<\/a>\r\n\t Get our Weekly Commitment of Traders Reports<\/u><\/b><\/a> - See where the biggest traders (Hedge Funds and Commercial Hedgers) are positioned in the futures markets on a weekly basis.<\/p>

\r\n<\/div>\r\n

\r\n
<\/div>\n

The\u00a0Thule Copper\u00a0project is located 14km northwest of Merritt, British Columbia and covers 10,084 hectares (~24,920 acres<\/em>) along the southern end of the Guichon Batholith. The Company recently completed a diamond drilling program designed to test 3 distinct zones on the property, referred to as the\u00a0Embayment,\u00a0Titan Queen, and\u00a0Eric. Total diamond drilling for the 2016 program was 1,084 meters in 5 holes through the Embayment Zone located approximately 1 km northwest of the past-producing Craigmont Mine.\u00a0 A follow-up drill program will be designed to determine continuity of mineralization further west along strike and at depth.\u00a0 Drill results represent an important near-term catalyst.<\/p>\n

Craigmont produced high-grade copper in a skarn setting but never encountered what management believes is an underlying porphyry.\u00a0 New evidence of possibly something Big was uncovered during the Company\u2019s aforementioned drilling last year.\u00a0 Drill results were a success, all holes hit mineralization and blockbuster hole\u00a0THU-002\u00a0in the Embayment zone returned\u00a01.11% copper\u00a0over a remarkable\u00a086 meter\u00a0width.<\/p>\n

Treasure Mountain<\/strong><\/h3>\n

100% owned Treasure Mountain, a former\u00a0operating mine,\u00a0has a shovel ready, opportunity to mine already permitted\u00a0Level 1 Stope 2\u00a0and ship mill feed to its Merritt Mill.\u00a0 Treasure Mountain\u2019s silver, lead, zinc endowment consists of 51 mineral tenures, 21 legacy claims, 100 cell units and five crown grants totaling 2,850 hectares\u00a0(~7,040 acres<\/em>).\u00a0 The Company maintains the option of reopening Level 1 to extract silver from Stope 2 at anytime and could realize indicative economics as shown below.\u00a0 Given that the Company is not starved for capital and that management believes precious and base metal prices are likely to move higher, there\u2019s no rush to exploit this opportunity.<\/p>\n

This indicative, up to C$ 9 million, one-time cash flow (over ~9 month mining period<\/em>) would mitigate (but not necessarily nullify<\/em>) the need for equity dilution.\u00a0 Combined with potential cash flow outlined above, Thule Copper could be robustly explored this year and next.<\/p>\n

\"\"<\/p>\n

As mentioned, Treasure Mountain has tremendous blue-sky potential.\u00a0 One of the best reported holes is\u00a0TM11-36,\u00a0with a 1.2 meter interval containing\u00a01,565 g\/t Ag (45.6 opt), 13.5% Pb & 9.9% Zn.\u00a0 Below is more dill data from Treasure Mountain.<\/p>\n

\"\"<\/p>\n

Conclusion<\/strong><\/h3>\n

\"\"<\/p>\n

Nicola Mining Inc. (TSX-V: NIM)\u00a0\/ (OTC: HUSIF) can be viewed as 3 companies in 1, it\u2019s not a cash burning, single-asset junior mining company.\u00a0 Importantly, the sum of the parts is greater than the whole because internally generated (tax-free) profits from Milling can be invested into the Company\u2019s other highly prospective projects (Thule Copper & Treasure Mountain).\u00a0 These two assets are not merely lottery tickets (like most green field projects<\/em>), each is host to very significant prior mining, development & exploration activities in a world-class mining jurisdiction.<\/p>\n

Nicola\u2019s Merritt Mill is not just a $30 million+ (invested capital<\/em>) 200 tpd processing facility, it\u2019s the only Mill in BC allowed to accept feed from anywhere in the Province, and in many cases the ONLY place otherwise stranded mines can send ore.\u00a0 Therefore, on both an operating basis (cash flow multiple<\/em>) analysis (see above<\/em>), and on replacement value, the Mill more than covers the entire market cap of the Company. \u00a0That means an investor today gets Thule Copper & Treasure Mountain for Free.\u00a0 But wait, don\u2019t take my word for it, check out\u00a0Nicola\u2019s website<\/a>\u00a0and click on the \u201cProjects\u201d tab, and review this March 8th\u00a0Corporate presentation video<\/a>.<\/p>\n

Still not convinced? \u00a0CEO Peter Espig<\/a>\u00a0is happy to hear from prospective investors, please email me at\u00a0epstein.peter4@gmail.com<\/a>\u00a0to discuss.<\/p>\n

Disclosures: \u00a0The content of this article is for illustrative purposes only. Readers fully understand and agree that\u00a0nothing\u00a0contained herein,\u00a0written\u00a0by Peter Epstein of\u00a0<\/em>Epstein Research<\/a>,\u00a0<\/em>[ER]\u00a0<\/em>including but not limited to, commentary, opinions, views, assumptions, reported facts, estimates, calculations, etc. is to be considered, in any way whatsoever, implicit or explicit investment advice. Further,\u00a0nothing\u00a0contained herein is a recommendation\u00a0or solicitation to buy or sell any security. The content contained herein is not directed at any\u00a0individual or group. Mr. Epstein and\u00a0<\/em>[ER]\u00a0are not\u00a0responsible, under any circumstances whatsoever, for investment actions taken by the reader. Mr. Epstein and\u00a0<\/em>[ER]\u00a0have never been, and are not currently, a registered or licensed financial advisor or broker\/dealer, investment advisor, stockbroker, trader, money manager, compliance or legal officer, and they\u00a0do not\u00a0perform market making activities. Mr. Epstein and\u00a0<\/em>[ER]\u00a0are not\u00a0directly\u00a0employed by any company, group, organization, party or person. Shares of\u00a0<\/i>Nicola Mining\u00a0are highly speculative, not suitable for all investors. Readers understand and agree that investments in small cap stocks\u00a0can result in a 100% loss of invested funds. It is assumed and agreed upon by readers that they consult with their own licensed or registered financial advisors before making investment decisions.<\/em><\/p>\n

\n
\n
\n
\n

At the time this article was posted, Peter Epstein owned shares in\u00a0<\/em>Nicola Mining\u00a0<\/em>and the Company was a sponsor of<\/em>\u00a0[ER].\u00a0Readers understand and agree that they must conduct their own research, above and beyond reading this article. While the author believes he\u2019s diligent in screening out companies that are unattractive investment opportunities, he cannot guarantee that his efforts will (or have been) successful.\u00a0Mr. Epstein &\u00a0<\/em>[ER]\u00a0are not responsible for any perceived, or actual, errors including, but not limited to, commentary, opinions, views, assumptions, reported facts & financial calculations, or for the completeness of this article or future content. Mr. Epstein &\u00a0<\/em>[ER]\u00a0are\u00a0not expected or required to subsequently follow or cover events & news, or write about any particular company or topic.\u00a0Mr. Epstein and\u00a0<\/em>[ER]\u00a0are not experts in any company, industry sector or investment topic.<\/em><\/p>\n<\/div>\n

\n<\/div>\n<\/section>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

By\u00a0Peter Epstein, CFA, MBA \u00a0\u00a0epstein.peter4@gmail.com\u00a0\u00a0\u00a0http:\/\/EpsteinResearch.com Nicola Mining Inc. (TSX-V: NIM)\u00a0\/ (OTC: HUSIF) has three primary, potential company-making assets, two nearing high-margin, steady-state cash flow.\u00a0 The third,\u00a0Treasure Mountain,\u00a0offers both a shovel ready, up to C$9 million profit opportunity (see below)\u00a0plus,\u00a0longer term, a potential company-making silver-lead-zinc mine on a past-producing mine site.\u00a0 Regarding the first two assets, […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-103141","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/103141","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=103141"}],"version-history":[{"count":2,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/103141\/revisions"}],"predecessor-version":[{"id":103143,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/103141\/revisions\/103143"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=103141"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=103141"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=103141"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}