Doublestar - Multimillion Dollar News
DSR is a stock I own and follow closely. Now I think something very important is about to happen that has gone completely unnoticed.
This "trigger" that I am talking about is that DSR sold to Northgate a copperproperty called Sustut. This would give DSR more than 11 million in royalties (2 millions cad each year over five years + more than 1 million as the project proceeds, if Northgate decides to put it into production. (Important, Northgate only has the option until december 2006, after that they loose the 0,5 million cad they paid for the option. This deal was done when copper was less than half of the current price...) Current DSR marketcap is about 9 million cad and the stock is extremely quiet.
Northgate paid alot of money for this option and decided that they would put Sustut into production, but then came problems with its main production unit, Kemess north, which had its expansion to Kemess south challenged by the indian community.
For some time until a few days ago it looked like the entire Kemess production unit would be closed down when it ran out of ore at the northern part. A few days ago an agreement that cleared all hurdles was reached! This is the trigger I have been watching carefully for.
The reason is that Northgate has said clearly that they will not take Sustut into production if they could ship the ore to Kemess, which means no Kemess south, no Sustut.
If you know about Hard rock analysts you might know of Selkirk and Ruddock Creek zink. Selkirk is earning 70% here from DSR. If one looks at the relative value of these two companies (Selkirk doesn't have so many other interesting near term triggers) only Ruddock more than justifies current valuation. On top of that you also have Dalmati Lake gold which Anaconda gold is earning into and putting into production.
DSR is a conservative company with lots of interesting properties, there are several more very interesting and careful with their cash. Getting 2 million cad each year for five years would further improve a great situation.
http://www.doublestar.net
(Observe below. Maximum royalty per year over 1,4 usd/pound is 2 million cad year)
On June 21, 2004, Doublestar accepted an offer by Northgate to purchase the Sustut copper project for $1,705,000 in staged payments and a royalty (scaled to copper prices) on tonnes of ore produced and shipped to the Kemess Mine. Doublestar expects to receive for approximately five years royalties that are derived from 5,497,000 tonnes shipped over that period at a grade of 1.80% copper at a nominal rate of 1,000,000 tonnes per year. The significant transaction means Doublestar will be able to obtain the benefits of production from Sustut without having to contribute any production capital to the project. In fact, by the end of the staged payments, the transaction will have returned all of the capital invested by the Company in the Sustut project.
The staged payments include:
$500,000 on signing (paid)
$500,000 on permitting
$250,000 on a production decision
$250,000 on completion of construction
$205,000 three months after production commences
Royalty scaled to copper prices on tonnes mined
US$ copper price/Lb.
Royalty per tonne mined $CDN
Estimated Annual Royalty
Less than $0.94375
Nil
Nil
$0.94375 to $1.00
$0.25
$250,000
$1.00 to $1.10
$0.50
$500,000
$1.10 to $1.20
$0.90
$900,000
$1.20 to $1.30
$1.10
$1,100,000
$1.30 to $1.40
$1.40
$1,400,000
Equal or greater than $1.40
$2.00
$2,000,000
Location and Ownership
The Sustut property is a copper deposit located in northeastern British Columbia, 155 kilometres by air from Smithers and 40 kilometres south of Northgate Exploration’s Kemess Mine. For cash and shares, Doublestar acquired Sustut from Falconbridge Limited in January 2000 as part of a larger portfolio of property interests. In 2004, Doublestar sold Sustut for cash and a royalty consideration.
Resources
At a 0.70% copper cutoff, measured resources are estimated to be 4,871,000 tonnes at 1.75% copper. Indicated resources are estimated to be 2,761,000 tonnes at 1.61% copper in two zones (Pincock, Allen & Holt, 2003). The preceding resources were constrained in a conceptual open pit in a draft feasibility study conducted by AMEC Engineering Services in 2003 that estimated that 4,676,000 tonnes could be mined at a grade of 2.02% copper and shipped to the Kemess Mine for treatment. At $1.00 copper, a $0.71 Canadian dollar, and a capital cost of $32,000,000, the project carried an estimated 20.7% IRR and a pre-tax NPV of $7.9 million when discounted at 7.5%.