Blog

On behalf of our team in Canada and Mexico, thank you for your interest in Oroco.  Important milestones at Santo Tomas were achieved last year, and for the year ahead we have a clearly defined plan to advance the project.    In H1 2023 we completed an extensive drill program at Santo Tomas: 76 diamond drill holes comprising 48,500 meters of total drilling.  Data derived from this program together with the historical database of 90 holes, comprising 21,000 meters of historical drilling, was used to calculate a mineral resource estimate.  In June of 2023, Oroco published an Indicated Sulphide Resource of 3.86 billion pounds of copper and equivalent metals (“CuEq”) and an Inferred Sulphide Resource of 4.70 billion pounds of CuEq.  Following this, in H2 2023, Oroco completed and published an initial Preliminary Economic Assessment (“PEA”) which identified a pre-tax Net Present Value (“NPV) of US$2.3 billion and firmly demonstrated the economic viability of Santo Tomas and confirmed its value as a top-tier copper asset. Santo Tomas’ strong economics are the result of a combination of a large copper resource, comprehensive available infrastructure, simple metallurgy, a cohesive and consistent grade distribution, and a low strip ratio, all leading to the PEA’s conclusion that the project has high potential for the development of a large, low-cost open-pit copper mining operation.  The PEA outlines a 21-year mine life with an average annual production of 107,000 tonnes of copper in concentrate, with cumulative revenues of over US$20 billion, substantial operating margins, and high leverage to rising copper prices.    Additionally, Oroco has identified numerous project enhancement opportunities, including oxide and sulphide leaching, expansion of the resource, and various mine plan refinements.  Work in these areas continues in 2024 and carries a high probability of additional improvement in project economics. Oroco’s ongoing enhancement of Santo Tomas in 2024 will take place as copper is expected to have a breakout year.  Burgeoning demand related to copper’s central role in renewable energy and the “electrification of everything” is leading to rising demand.  In addition, dramatically reduced levels of discovery of new copper resources and the decline in the quality of existing copper sources point to supply/demand imbalances and future copper supply deficits.     Major mining companies with an interest in acquiring copper projects for future development face a scarcity of large, viable, independently owned copper projects such as Santo Tomas.  Asset scarcity will therefore play an increasing role in future M&A valuations.  The sector is experiencing increasing M&A activity, with transaction pricing expected to test the historical valuations of 35-50% of post-tax NPV.  It is important to note that Oroco’s current market capitalization of approximately US$70 million represents just 6% of Santo Tomas' current post-tax NPV.   In writing about increasing levels of M&A in the mining sector devoted to copper assets  S&P Global Market Intelligence says, there is “strong evidence of increased interest in the red metal due to its central role in the green energy transition and concern over dwindling reserves and supply.”    Valuations based on the average prices paid for copper contained in Reserves and Resources for the most recent year reported on by S&P are US$0.12 per pound. Santo Tomas’ Indicated Sulphide Resource totals 3.86 billion pounds of CuEq and its Inferred Sulphide Resource is 4.70 billion pounds of CuEq.    During 2023, Cantor Fitzgerald initiated coverage of Oroco, with a BUY rating in each of the two research reports issued. In its research report dated October 18, 2023, Cantor wrote: “With a dearth of new projects available and a discounted valuation, Oroco presents an attractive buying opportunity for investors and for metals producers looking to expand their copper project pipeline.”   We have also received a very important clarification of the recent Mexican government proposals which may affect the mining sector.  While much speculation exists as to potential exploration and production limits being placed on mining projects, the recent proposal for amendments to the Mexican Constitution makes it clear that the proposed amendments do not apply to existing mining concessions such as Santo Tomas.   An up-to-date corporate presentation may be found here, and we welcome your inquiries by return email or by using Oroco’s VRIFY page, where one-on-one virtual meetings can be scheduled.  Additionally, Oroco’s senior management will be attending the upcoming PDAC conference March 3rd to 6th in Toronto, and would be pleased to hold in-person meetings while there.   Best Regards,   On Behalf of Oroco   Disclaimer: Please note that any opinions, estimates or forecasts regarding Oroco’s performance made by the analysts covering Oroco are theirs alone and do not represent opinions, forecasts or predictions of Oroco or its management. Oroco does not, by its reference above, distribute or otherwise imply any endorsement of or concurrence with such information, conclusions or recommendations.