True North (ASX: TNC) shares are up 23% on a copper find. TNC shares rose on a report of 4.95% Cu in a drill hole at Mt. Vero. That’s the first drill hole at the site and is obviously good news. But it is also very early news. Very early days in even the exploration process. Obviously, it’s entirely true that any currently functioning mine started with someone first finding something interesting. Which was then explored further, worked on, delineated and then finally declared economic and worth mining. But there’s still an awful lot of work to be done between that first finding and the definitive feasibility study (DFS) which leads to the decision to mine and then, finally, some revenue.
We have to admit that we rather like True North. On a platonic, theoretical, basis perhaps. Because we think their other and current operation makes good sense. They’re making copper sulphate on a small scale. “True North Copper Limited (ASX:TNC) (True North, TNC or the Company) is pleased to announce it has commenced copper sulphate production at its Cloncurry Project in Queensland, Australia, with its refurbished solvent extraction and copper sulphate crystallisation plant now fully operational. TNC has an exclusive offtake agreement with Kanins International for its copper sulphate production in Queensland.”
Given the size and market capitalisation of TNC this is an interesting but not definitive project. But it does accord with our general view of the mining world. Extraction technology moves on over time. The most useful place to apply the new methods is often on the tailings and gangues of the older mines. Further, we expect mining to become ever more about putting materials into solution - hydrometallurgy, not pyrometallurgy that is. That copper sulphate project ticks all of those boxes so it’s fully in accord with our prejudices. But equally it’s always going to be a nice little project. Such things do not scale. So, what we in English English would call a “nice little earner” and no more.
True North Copper share price from Google Finance
The big rise there is when True North came back from suspension, refinanced and with that copper sulphate project ready to roll. The most recent news causing the final uptick to the right is this: “TNC intersects 66.5m at 4.95% Cu in first drillhole at Vero Resource, Mt Oxide
True North Copper Limited (ASX:TNC) (True North, TNC or the Company) is pleased to report exceptional high-grade copper cobalt-silver mineralisation from the Company’s first drillhole of an initial diamond drilling program at the Vero Resource, part of its 100% owned Mt Oxide Project, Queensland.” Now that’s different.
That now brings hopium back into the calculation. The copper sulphate project, well, we can see the volumes and prices there, work out likely cashflow. But this finding of copper mineralisation, well, no one knows as yet. OK, so it’s deep and rich. But how wide? That is, how much copper is there, enough to bother with mining it? If so, is this again a nice little earner or the start of something much grander?
As no one - including True North Copper - knows the answers to those questions the valuation is simply based upon hope about it.