Categories: Mining Stocks
Topics: Copper Stocks

Latin Metals (TSX-V: LMS)(OTC: LMSQF) CEO Keith Henderson on Minsur S.A. Option Terms for Lacsha Copper Project, Lima Department, Peru

 

Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is the CEO of Latin Metals (TSX-V: LMS)(OTC: LMSQF), Mr. Keith Henderson. Keith, how the heck are you? It's great to have you on.

Keith Henderson: Yeah, I'm doing really well. It feels like it's a little time since we talked, so I'm happy to be back and great to hear your voice.

Gerardo Del Real: No, great. Listen, it's been a bit, but I think it was time well taken off. Gold is up over $100 today. Silver's flirting with $70. Gold at $4,623. We had the summer doldrums. I joked off air that vacation time is over. It seems like all systems are a go, and that includes Latin Metals. You've had a pretty solid last 30 days in the market, in large part because you continue to execute the business model for Latin in a fantastic, fantastic and efficient way. This latest deal for the copper project here in Peru, I absolutely love the way that it's structured. It's a unique way of looking at it, and so I wanted to give you the opportunity to talk about the letter of intent that you just signed on the project and then the approach that you're taking to getting the most value out of the deal for shareholders.

Keith Henderson: Yeah, absolutely. So this is a project that we've probably talked about before. I probably promised you a few times in the past that I think I can get a deal done on this, and sometimes things take time, but here we are and it's lovely. It's a project that we generated internally ourselves, so our VP exploration, Eduardo Leon, came up with this entire concept, staked it. We did a bunch of work over a few years. We actually spent something close to 900,000 Canadian dollars on this project on surface work, but that's really nothing compared to what we are now going to be able to convert this into.

The deal on this is for a project that has really just got surface work. It's got no historical drill hole, but we've managed to convert that into terms for an initial 75%, where a company, Minsur, are going to come in and drill 60,000 meters over six years. It's a really big drill commitment. And we can't say exactly what's that going to cost them, but let's just use 450 U.S. dollars per meter all-in as a kind of an expected cost, and that converts to close to 30 million U.S. dollars of expenditure on drilling alone.

They also, during that period of six years, give us something of the order of $3.6 million in cash, which as you know, is very important to us. That's how we finance our company. That's why we basically don't have to go back to market. And that's such an important aspect of what we're doing from day to day here, is not diluting our shareholders. So this helps us with our day-to-day cash. It gets a ton of work done on the project.

If Minsur are successful within that option period and they think to themselves, "We really have to own 100% of this project," they'll have 180 days to think about that. And then if they want to do it, they have to pay me $20 million U.S. cash to buy that 25%. That leaves us with something that's very, very valuable to us, which is a 2% and it's our royalty. We're a prospect generator. We are moving ourselves to becoming a royalty company. That's where we want to get to, and so having a valuable 2% royalty on something like this is amazing for us. As with a lot of deals, the companies that are giving us this royalty, they want to have an opportunity to buy back some of it. That's typically what we see.

So for a three-year period after that, Minsur have got an opportunity to buy the other 1%. And guess what? That's another $20 million U.S., another $30 million Canadian, so this really is a valuable deal. If they go all the way, if they find something interesting here, they want to own it 100%, they want to buy part of our royalty, we've got 42.6 million U.S. dollars coming in, close to 60 million Canadian. And it really is an amazing potential valuation for something that internally has cost us less than $1 million, and something that we've been able to create from absolutely nothing, and it speaks to our technical ability. It speaks to all aspects of this company. This is exactly the kind of thing that we're trying to do, and we've done it with Minsur, who I think are going to be a fantastic partner.

Gerardo Del Real: No, listen, I think their background and their experience speaks for itself. I think, slowly but surely, the market is starting to recognize the diligence with which you and the team go about finding the best partners for these projects. So with that, I'd love for you to set the table for the rest of the year. What's the rest of the year look like as far as catalysts go, Keith? It's always about what's next, Keith. It's always about what's next. You know this business.

Keith Henderson: Your friend and mine, Jeff Phillips, has been giving me a hard time recently because I ... not a hard time, but he noticed that I've been telling people I'm going to get all of our existing projects out to partners by the end of the year, and he smiles at me and says, "That's not going to be that easy," and I think I can do that. This is the first in what I hope is going to be a series of announcements, both on the disposition to partner side and, if things go well, also on the acquisition side. Because remember, as we get all of our projects out to partners, we have to be bringing in new things that we can focus on, new things, new projects, and grow the company.

And as I probably said to you before, the beauty of the model that we work with is that growth doesn't really end up costing us anything. We're spending $3 million a year running this company, doing our exploration. It's not an expensive business that we're in. And when all of our projects are out to partners, bringing in new projects, that kind of growth doesn't cost us any more money than what we've already spent in year to year. So we just become bigger and bigger and bigger, and as these projects come in and as they get out to partners, the shots on goal increase in a very real and meaningful way.

And the multiplier effect, being all of the dollars being spent by other companies for every $1 that we are spending also become a bigger and bigger number. Over the next three or four years, that number is around $8.50 from our partners, but that only reflects the deals that I've been able to get signed and announced so far. So to the extent that I can bring in more deals, we're going to see even more dollars being spent by our partners, but our expenditure will remain exactly the same.

Gerardo Del Real: Well, listen, in a highly unsustainable business, you have been able to carve out an uber-sustainable model. Congratulations on that front. I'm looking forward to having you back on, Keith, as you continue to execute these deals, and obviously looking forward to having you back on once we get results from some of that partner-funded exploration that there's going to be a lot of here over the coming months. Anything to add to that?

Keith Henderson: No, nothing to add really. Looking forward to talking to you again. Thanks for your continued support and your continued faith in what we're doing here. I really appreciate it.

Gerardo Del Real: No, thank you for your time, and thanks for the execution. Thank you.

Keith Henderson: Thanks so much. Take care.

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