Deep-South Resources (DSM) – Copper Player needs Capital to Deliver Growth

Deep-South Resources Inc
  • TSX-V: DSM
  • Shares Outstanding: 80M
  • Share price C$0.11 (04.08.2020)
  • Market Cap: C$8.3M

Interview with Pierre Léveillé, President & CEO of Deep-South Resources (TSX-V: DSM).

Deep-South Resource is a copper/VMS exploration company. Its flagship Haib copper project is potentially large and is situated in the deep south of Namibia (who would have thought). Haib has both a 43-101 Resource and a PEA with 5Bn lbs of copper indicated and inferred resource). Let’s take a look at the key figures.

Haib 43-101

Resource ClassMillion TonnesCu(%Contained Cu per billion lbs
Indicated456.90.313.12
Inferred342.40.292.19

Haib PEA (at various copper prices)

Financial Metric$3.00/lb Cu Price$3.30/lb Cu Price$3.60/lb Cu Price
CAPEXUS$191.8MUS$191.8MUS$191.8M
Total Operating ExpenseUS$1.41/lb CuEqUS$1.42/lb CuEqUS$1.43/lb CuEq
NPV(7.5%), post-taxUS$463.1M (CA$578.9M)US$567.4M (CA$709.3M)US$671.3M (CA$839.1M)
IRR, post-tax23.0%26.1%29.1%
Payback Period, post-tax5.7 years4.9 years4.4 years
Throughput (Mtpa)8.58.58.5
Annual production lbs / CuEq47 million47 million47 million
Strip ratio2:12:12:1
LOM55 years55 years55 years

So, a potentially large resource with a reasonable CAPEX and acceptable payback period.

The company also has another project called Kapili Tepe in central Turkey. It is a copper, nickel, cobalt and gold asset, and Deep-South Resources acquired 75% of it from Baltic Investment Group ApS in June 2018. It comprises of 1 mining license and 2 exploration licenses over 50km2.

Management and Directors hold 24% of shares, and Teck Resources holds 23% rising to 27% after the debt restructure, with the rest as a free float. Deep-South claims it is actively involved in the acquisition, exploration and development of major mineral properties in Africa. Léveillé says the growth strategy is to focus on the exploration & development of quality assets, in significant mineralized trends, close to infrastructure, in stable countries.

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Deep-South holds 100% of the Haib Copper deposit in the south of Namibia. Haib is arguably the oldest porphyry deposit in the world and one of the largest in Africa. Deep-South is actively seeking other precious and base metals projects in Namibia and in other stable countries.

With copper prices on the up, Deep-South Resources has the potential to time its entry nicely. The company will commence a financing this week to the tune of US$2M. It will use these proceeds to drill in the high-grade section of the deposit. It believes these results will add value and it will be able to conduct a subsequent raise on better terms. This is expensive money, and shareholders will be hoping Léveillé knows exactly what he is doing. He appears to be drilling for both geology and the market, but he will need to focus on adding value if he hopes to continue receiving support from the market. Will he be able to drive liquidity into the stock? That is his intention.

What did you make of Pierre Léveillé and Deep-South Resources?

Company Page: https://www.deepsouthresources.com/

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