LCL - LCL Resources

[barney]

Certainly have to be classified low grades @kennas as you say. The widths are off the map though.

Many really large deposits seem to have similar characteristics??

Still early days of course.

 

[finicky]

So, doesn't bother anyone that this Peruvian escapade, under the current M.D, did a 40:1 consolidation of shares and options approved at a July 2019 EGM and finalised September 2019? This occurred partly "in consideration" of Metminco's takeover of Andes Resources Ltd.

And this was not much more than two years after a 50:1 consolidation effective January 2017.

Yet today there are still 471,009,533 shares, 53,061,914 listed options and around 46M unlisted options/perf shares. Your equity per share looks safe here.

Anyway, at least the board doesn't look too diminished by dilution:

 

[finicky]

Quick calc:
471M fpos today represents:
471M x 40 x 50 = 942 Billion of the original shares
Tack on 200 billion option/perf shares if you want.
Just to belabour the point, if there had been no capital consolidations, there would today be 942 billion shares quoted assuming they would still have been able to do capital raisings, which they wouldn't.

So hyperinflationary companies say they want a share price that will attract institutional interest and want to reduce volatility and reasons like that to justify a 'capital reconstruction' but I suspect naked figures like the above don't look to good to punters without a bit of 'hedonic*' adjustment, lol. Besides, how do you issue more equity at an attractive discount when the s.p is already at 0.001?
* not the right use of hedonically I know, just an analogy

 

[The Triangle]

Quick calc:
471M fpos today represents:
471M x 40 x 50 = 942 Billion of the original shares
Tack on 200 billion option/perf shares if you want.
Just to belabour the point, if there had been no capital consolidations, there would today be 942 billion shares quoted assuming they would still have been able to do capital raisings, which they wouldn't.

So hyperinflationary companies say they want a share price that will attract institutional interest and want to reduce volatility and reasons like that to justify a 'capital reconstruction' but I suspect naked figures like the above don't look to good to punters without a bit of 'hedonic*' adjustment, lol. Besides, how do you issue more equity at an attractive discount when the s.p is already at 0.001?
* not the right use of hedonically I know, just an analogy

Would be an interesting exercise to reverse all share consolidations among juniors since about 2010 and see how many would sit above 1 trillion shares - I don't think LCL would be alone.

The grade just looks too low for a small junior. We see these sorts of situations every so often. A little player sinks all its money drilling a deposit that requires the capex only available to a big player. LCL has too much happening in their presentation. I want to see a focus on one thing. Otherwise this will end up in the perpetual capital raising bin... Mult rig, multi target is good for a big company - not a little one. 3 rigs running turning out core will burn $ quickly. At 30 million MC I would be interested, at 70 million I think its a bit expensive.

I hate the number of options... If LCL is a good deal then these directors can pony up $$$ and buy real shares - not convert options.

 

[finicky]

@The Triangle
Yes, it's common but this one is one of the worst I've checked out - that's has been a 2000:1 consolidation in less than 3 years. The only personal experience I have of a super diluter almost this bad was one I actually owned and that was Intec Ltd which became SciDev (SDV). Win or lose, I automatically short circuit any 'research' on a company that has been highly dilutionary.

"If LCL is a good deal then these directors can pony up $$$ and buy real shares - not convert options"
Yeah, if they don't back their company why should we? Nowadays boards seem to favour performance shares - less hurdle and they don't even have to cough up a nominal exercise price. Unfortunately this is not as good a red flag as 'egregious' dilutionary behaviour I've found, e.g. just recently IDT took off and the management of that company loaded up with freebies a year ago - it's one thing that discouraged me accumulating a few more.

 

[Sean K]

So, doesn't bother anyone that this Peruvian escapade, under the current M.D, did a 40:1 consolidation of shares and options approved at a July 2019 EGM and finalised September 2019? This occurred partly "in consideration" of Metminco's takeover of Andes Resources Ltd.

Not sure where all that consolidation is in the announcements, but I thought the takeover deal was 25 Metminco shares for 1 Andes. That's just out of the merger presentation, maybe that changed.

How does the consolidation you've mentioned dilute the value to holders?

 

[finicky]

If you hold say 50,000 shares in a company and each share has a 'book value' (or equity per share value) of 0.01 and the company consolidates them 50:1 so that you now have 1,000 shares and each share now has a book value of 0.50 then you haven't lost value.

But what if the reason the company has done this is just so they can sneakily issue lots of new shares so that in time your share's book value (equity divided by the number of outstanding shares) is back to .01? Your shares only have a 1/50th of their original value. You have 1,000 shares with b/v = .01 instead of 50,000 shares with b/v = .01

From the screenshot of LCL's financial history you can see this is what happened in the 'shares outstanding' and 'book value' rows. In fy17 there was a share consolidation that resulted in a temporarily increased book value of .08 from .01. Then 1 year later in fy18 the shares have been inflated again and book value is back to .01.

The paying shareholder loses value in his shares at a rapid rate while management keeps up via salaries/fees and share options/performance shares.

The Metminco/Andes acquisition did not sustain the book value as the shares rapidly inflated again just as they are doing currently after the second consolidation. It suggests to me that the company will go on like this. Even if they make a big valuable discovery your interest might be inflated away. A trader might lookmat this differently - I look at it like an investor looking for management I can trust to sustain my investment and not just look after themselves.

You can find where a company has done share consolidations by going back over historical announcements or a search on google with this:

'share consolidations los cerros ltd'

 

[Sean K]

Certainly have to be classified low grades @kennas as you say. The widths are off the map though.

Many really large deposits seem to have similar characteristics??

Still early days of course.

La Colosa which is in the same gold belt has about 28m oz @ 0.8 g/tn. That project is on hold due to local politics, which is a worry...

 

[Sean K]

LCL have found another target they're calling Ceibal close to Miraflores and the site of the proposed mill next to Tesorito.

Could potentially add more ounces to the overall mining program that would cover the four discoveries within a 2km radius.

Not too exciting. Waiting for the other drill holes at Tesorito to confirm depths, extensions and maybe some better grades.

New porphyry target (Ceibal) discovered ~1km southwest of Tesorito

▪ Large-scale surface footprint, with a 800m x 600m Au-Cu-Mo soil anomaly and adjacent magnetic anomaly
▪ First trench intersects 75m @ 1.2g/t Au and 25m @ 1.3g/t Au
▪ Shares many similarities with Tesorito including regional structural setting
▪ Ceibal promoted to be evaluated within the 2021 drill program

 

[Sean K]

Trading halt - for assay results. That means they must be pretty good. Or, pretty terrible! eeeeek

REQUEST FOR TRADING HALT

In accordance with ASX Listing Rule 17.1, Los Cerros Limited (Company) hereby requests an immediate halt in the trading of its securities (Halt) pending an announcement in relation to assay results.

The Company requests that the Halt end on the earlier of the commencement of normal trading on Wednesday, 7 April 2021, or when the anticipated announcement referred to above is released to the market.

 

[Sean K]

Is the MD ramping his stock a bit, or is it really that good?

"elevating Tesorito South to a globally significant recent gold porphyry discovery"

There's some pretty wide intercepts here. If this was in Australia I think the MC would be a tad higher.

 

[greggles]

Trouble with these low grades is that you have to dig out a lot of dirt to get the gold. 400 or 500 metres is a long way down to dig to get grades of 2% or 3% and the expense increases the deeper you go.

I think the project has some potential but I'd like to understand the economics of it better and wonder what the eventual AISC will be. A lot of unanswered questions at the moment.

 

[Sean K]

Trouble with these low grades is that you have to dig out a lot of dirt to get the gold. 400 or 500 metres is a long way down to dig to get grades of 2% or 3% and the expense increases the deeper you go.

I think the project has some potential but I'd like to understand the economics of it better and wonder what the eventual AISC will be. A lot of unanswered questions at the moment.

It's starting to run pretty deep but there's plenty in the top 300m. I'm taking a punt that this will be multi million ounce based on the dimensions and depths. Just Tesorito South probably has 1m ounces it. Should be an MRE out later this year incorporating all the drilling they are doing now which will add to Miraflores and the thing I can't pronounced to the north. Current MC of $70m just seems cheap for the potential volume. Fingers crossed.

 

[Sean K]

Tesorito South is expanding to the north and remains open. Maybe this deposit could extend all the way to Tesorito North. The holes they dug up there were pretty low grade but if it's all one system it could be one giant pit. I've been doing some research on other Au, Cu, porphyry systems in the Andes and these grades are about average. It's the bulk tonnage that's more important here.

This is certainly going to change the parameters on the DFS they've already done for Miraflores that only had 800k oz au in it.

 

[Sean K]

LCL have found another target they're calling Ceibal close to Miraflores and the site of the proposed mill next to Tesorito.

Could potentially add more ounces to the overall mining program that would cover the four discoveries within a 2km radius.

Not too exciting. Waiting for the other drill holes at Tesorito to confirm depths, extensions and maybe some better grades.

New porphyry target (Ceibal) discovered ~1km southwest of Tesorito

▪ Large-scale surface footprint, with a 800m x 600m Au-Cu-Mo soil anomaly and adjacent magnetic anomaly
▪ First trench intersects 75m @ 1.2g/t Au and 25m @ 1.3g/t Au
▪ Shares many similarities with Tesorito including regional structural setting
▪ Ceibal promoted to be evaluated within the 2021 drill program

View attachment 122085

So, they've diverted a rig from Chuscal to Ceibal after it had finished a few holes and waiting for assays to determine next holes. Good plan.

They dug another trench in Ceibal and found similar grades so this area looks prospective and closer to the proposed Miraflores plant.

All still speculative at this point unless Ceibal turns into a Tesorito 2 and there's porphyry under Chuscal.

 

[greggles]

The trenching results look promising but it is the assay results that will tell us what is under the ground at Ceibal. The announcement says "scout holes" but I couldn't see any details about how many holes are being drilled and how deep.

The announcement says that there is a backlog of Chuscal assays pending, so we will hear about them first and then Ceibal at a later date. Chuscal in May and Ceibal June?

 

[Sean K]

The trenching results look promising but it is the assay results that will tell us what is under the ground at Ceibal. The announcement says "scout holes" but I couldn't see any details about how many holes are being drilled and how deep.

The announcement says that there is a backlog of Chuscal assays pending, so we will hear about them first and then Ceibal at a later date. Chuscal in May and Ceibal June?

They had a collar indicated in the ann (CEDDH01) pointing SW. I guess that's their best guess of hitting something according to the ground that's there. But yes, that's one hole. The other holes they've been digging have been generally going to 350m so I imagine that's the plan.

The first diamond hole at Ceibal is designed to drill under the centre of anomalous gold and copper soil and rockchip anomalies, across lithological and veining structures.

They've come in on time with the last few assay results. Maybe the outstanding Chuscal one's didn't hit anything visually exciting and they put a low priority on them or didn't want to scare the punters. I remember they announced Tesorito H16 had hit something visually exciting before the assays come back so it means to me that Chuscal might be dirt.

 

[Sean K]

LCL out ramping their stock again this am. Not sure why they haven't done a geophysical survey over the project as yet. Fingers crossed they do have that larger porphyry at depth that links up their current targets. That would completely change the story. It's getting pretty deep though.

 

[Sean K]

Sounds like Ceibal has got some nice dirt in it. It's a slightly bigger target than Tesorito which is around 300x300x300 at over 1g/t. By my calcs that's about 1m ounces, so if this is similar it's going to significantly add to gold in the ground within walking distance to the proposed Miraflores mill. Could even change the entire PFS and they'll have to start again. Hopefully an MRE on Tesorito later this year and maybe this also gets included. Early days and anything could happen. Might be waiting for some time perhaps.

 

[Sean K]

They're slowly stepping Tesorito out. Very slowly.... Tesorito South is already about 250x300x300 ish which back of the envelope turns into about 1m oz au. So, they've already got about 2.3m oz au in three deposits. If South can join North and Ceibal is the same as Tesorito then we're looking at over 3m oz au. Maybe that's not enough for a porphyry. Dunno.