barchart rates cjo a buy, page-5

Hi Pete,

here is a more detail analysis of cjo

Cjo an analysis

There are 4 main projects which cjo holds.
They are: San Anton; gold and silver project; Namiquipa silver project; and Espirito exploration project. All these projects are in Mexico. Lastly they have a joint venture with syndicate metals over the copper moly ptoject in Mount Isa in Australia. And the Mount phelp iron ore project.
We will only be looking at the San Antom project at the moment even though the upside from the Namiquipa project looks very promising but it have not got a resource yet.

Market cap @12 cents about $90 million

San Anton project. The San Anton project consist of a low grade polymetallic deposit of gold silver and copper. It consist of a gold rich and a copper rich porphyry deposit all in one hill called Cello Del Gallo. Cjo owns 67% of the project while goldcorp owns the rest of the 33%. A definitive or bankable feasibility studies are being done right at this moment for the gold rich area only. The definitive feasibility studies should be out in the March quarter.

San Anton project analysis
Resource
Proven and probable reserve -0.71 moz gold @0.69g/t and 15.34 moz silver @ 14.82g/t
Measured and indicated- 0.95moz gold @0.66g/t and 20.02 mzoz silver @ 13.83g.t
Strip ratio –.74:1

Two stage production.
First stage heap leach
The pre feasibility suggest that the first stage heap leach process would recover 0.45 million oz gold and 5.32 million ozs of silver over a period of 8 years at a cash cost of $491 per oz of gold equivalent.
Capital cost requires is about $87 million
Using a gold price of $1293 and silver price of $23.87 gives a net present value of $200 million with a 6% discount. And a net cash flow of $290 million.
Using a gold price of $1424 and silver price of 35.81 gives a net cash flow of $409 million.

Second stage Carbon in Leach
This will produce 0.68 million ozs of gold and 4.3.million ozs of silver over a period of 6 years.
Capital cost requires is $83 million. Operating cost $540 per oz of gold equivalent.
Using a gold price of $1293 and a silver price of $23.89 gives a net cash flow of $410 million.
Using a gold price of $1424 and silver price of 35.81 gives a net cash flow of $549 Million.

Combining them gives a net cash flow of about $1 billion using a gold price of $1424 and $700 million using a gold price of $1293.over 14 years.
The calc above does not take into consideration of better recoveries using SART process and HPGR recoveries which would be factored in the bankable feasibility studies.
There is also upside in regional exploration which has turned up reasonable grades around the area.
Also this feasibility only takes into account the gold rich area. There is also the copper rich area which the company is not looking into yet. The amount of copper, gold and silver in the copper rich area would be close to the amount of gold and silver in the gold rich area. If the commodity bull market continues on for another 5 to 10 it is quite likely the copper rich area will be developed too.

Mount Phelps Iron Ore project in Mt Isa Australia.
We have a indicated and inferred resource of about 30 million tonnes grading 33% Iron.
Even if it is worth one dollar a tonne it would give 33 million dollars.

However I think the Jewel for CJO is really the Namiquipa silver project.
It is early days yet but some of the drill holes are high grade and even more important it is wide. This would mean it can be bulk mined which means low cost.

Without giving any value to all the projects except for San Anton anyone can see how undervalue it is. We are looking at a 100 million company with a potential cash flow of over one billion dollars in 14 years. Of course the reason it is not fully value is the risk involved.

Risk
As with all miners ther are risk like country risk. However Mexico is country is not much higher than “safe” countries like Australia.
Then there is financing risk. You can have 1 or 10 billions dollars worth of stuff in the ground but if it cannot be monetized it is not worth anything.
Then there are all those risked related to mining and cost blow outs and delays.

Share price drivers in the near term.
Release of a positive bankable feasibility soon. –very likely
If they could find a buyer for the iron ore project even at $1 a tonne or if they could find joint venture partner.-who knows
If they could find financing after the feasibility is released. –likely