TORONTO () -- Toronto-listed junior Petaquilla Minerals [TSX:PTQ] has seen its share price run up about 50% this month and continues to touch new highs even as most other commodity related stories are getting pounded. The company has something that few others of their size can boast - a world-class copper asset.
World-class assets in the commodity space are beginning to attract significant attention from investors and major mining companies, as they are hard to find, expensive to delineate and certainly take time to bring to production. The market is waking up to that reality (witness the recent run in Peru Copper), and stories like Petaquilla will command and retain a healthy premium going forward.
The Asset
Petaquilla owns 52% of the Minera Petaquilla S.A. copper/gold porphyry system with the remaining 48% held by Inmet [TSX:IMN]. Teck Cominco [TSX:TEK-SVB] currently has no stake, but can acquire an effective 26% interest in Minera Petaquilla by funding PTQ's share of the cost of bringing the project to production.
Based on a 1998 feasibility study completed by AMEC for the joint venture partners under the direction of Teck, the Minera Petaquilla S.A. project contains a mineral reserve of 1.115 billion tonnes grading 0.50% copper, 0.09 g/t gold, 0.015% molybdenum as well as recoverable silver.
The recoverable metal content contained in these reserves totals at least:
- 9.4 billion pounds of copper;
- 1.37 million ounces of gold;
- 24.1 million ounces of silver; and
- 131.1 million pounds of molybdenum.
In late December of 2005, Petaquilla announced that it had entered into a MOU with one of China's largest integrated metal producers for the development of the project, a deal which really illustrates that country's insatiable appetite for metals and raises the profile of PTQ's project, making it much more likely that it will be developed sooner than later.
According to the press release at the time, The MOU contemplates a transaction, which includes:
- A substantial equity investment in PTQ by the Chinese company;
- The ownership by PTQ of a 100-per-cent interest in the Petaquilla copper project by the acquisition of the interests currently held by the company's partners;
- Participation in project financing and construction; and
- An off-take agreement for the delivery of copper concentrate from the Petaquilla copper project.
At the time, the news was largely overlooked by the market, but based on recent price action in the company's shares it would appear that someone is now taking notice, and significant news may not be too far off.
It should be noted that as part of the deal on the Petaquilla project, PTQ has a 100% interest in the Molejon gold deposit, which a resource of 893,000 ounces. The company is looking to expand on the current resource, complete a feasibility study and move to a production decision before year-end.
Conclusion
Petaquilla currently has a market capitalization of about C$100 million. Although early investors in the stock have seen significant appreciation in the value of their positions (over the last six months), things may now be really heating up in a company specific way and more gains should follow.
Between the potential for a company-making deal with the Chinese, which could catalyze development and bolster the company's valuation, and PTQ's solid, steady progress with Molejon, the path of least resistance would appear to remain higher.
Shares in Petaquilla closed Thursday at C$1.48, up 11 cents on above average volume.
