Description and Investing Strategy

Description

Metminco is a mineral exploration and mining company incorporated in Australia, but operating in Chile and Peru, in South America.

In October 2007 Metminco listed on the ASX as a diversified mineral explorer. In December 2008, it announced a scrip for scrip offer to acquire Hampton Mining Limited (Hampton). Metminco currently owns 100% of Hampton.

Through its ownership of Hampton it has an interest in four projects, mainly focused on copper, but with exposure to molybdenum, gold and zinc. Projects range from early stage exploration, through advanced stage exploration, to feasibility.

Metminco’s premier project is the Los Calatos copper - molybdenum porphyry deposit located in southern Peru near to, and in the same metallogenic belt as, three large porphyry hosted, copper-molybdenum mining operations, where a Pre-Feasibility Study is pending.

Metminco’s other advanced projects include the Mollacas Copper Leach Project, for which a Feasibility Study and Environmental Impact Study have been planned, and the Vallecillo polymetallic (gold-zinc) project, where a Preliminary Economic Assessment has been completed.  Both of these projects are located in north central Chile, approximately 500 km north of Santiago.

Operating jurisdictions

Both Chile and Peru have substantial mineral extraction industries, developed over many decades, and both countries are major producers of copper.  It is estimated that in 2013 Chile and Peru hosted 38% of the world’s copper reserves, and produced some 39% of the world’s copper production.

Both countries offer favourable jurisdictions for exploring and developing mineral projects. To this extent, in 2009 Chile and Peru attracted an estimated 12% of the world exploration spend.

Based on the Fraser Institute of Canada's "Survey of Mining Companies 2012/2013", and in particular it's Policy Potential Index1 , Chile and Peru rated 23 and 58 respectively out of the 96 countries that were evaluated.

Investing strategy

Metminco's growth strategy is to become a mid-tier copper producer.  To this effect, extensive exploration work and development studies have been conducted at two of its main projects, namely Los Calatos and Mollacas.

Mollacas has the ability to generate a medium-term cashflow, or be monetised, and thereby part-fund the Company's future cash flow requirements, including further developmental work at the world class, porphyry hosted, Los Calatos copper-molybdenum project.

The Board continues to evaluate alternative funding strategies for the development of the Company's assets so as to minimise the raising of capital on a recurring basis through the market.  By virtue of the extent of the funding required for the future development of the Los Calatos Project, it is clear that the Company needs to secure a strong financial partner.  Accordingly, the Company continues with their efforts to identify such a partner, in what is presently a difficult market for concluding such transactions.  The Company has adopted a flexible stance with respect to the structure of any potential transaction, on the proviso that fair value is realised for this valuable asset.

Metminco will continue to maintain a portfolio of projects that not only allows it to manage the risks associated with exploration, but creates optionality from a funding, commodity and production perspective.

The Company believes it has the necessary skills and experience to successfully undertake this strategy.

Statement by the Chairman, Tim Read:

The past year has been a particularly difficult period for concluding asset transactions in the mining sector, with potential acquirers suffering from cash and market constraints, and a substantial number of competing projects being put up for sale.  We have, nevertheless, continued with our search for a strong financial partner in order to bring Los Calatos to value.

Our efforts have been significantly enhanced by the optimisation study completed in August 2013 with the assistance of RungePincockMinarco.  This study demonstrated a project with 14 years of open pit production and a subsequent 20 year underground operation.  Los Calatos would, over this combined 34 year life, have an average annual production of 98,000 tonnes of copper metal in concentrate at an estimated average cash cost of US$1.12 per pound, after by-product credits.

Extract Patersons Securities Research Note on Metminco dated 01 September 2014:

Metminco Limited's (MNC) Los Calatos Cu-Mo porphyry project in Peru is a significant deposit on a global scale.  We believe that the deposit ranks in the top 25 copper projects in the world (under feasibility) and, with copper demand forecast to increase by over 50% by 2020, further supply is likely to be needed.


1 PPI is a ‘report card’ on the attractiveness of countries mining policies.