Analyst Deep Dive into Halo Minerals’ Updated Economics

We were pleased to speak once again with Nick Hatch, Natural Resources Analyst at Equity Development this week, following the publication of his latest research note on Halo Minerals (LSE:HALO).

Since we last spoke to Nick in June, Halo has made significant progress at its Playa Verde copper-gold tailings project in Chile, including updating its Competent Person’s Report, increasing its Ore Reserves, advancing through its permitting milestones.

Nick’s latest note takes a closer look at what those developments mean for the economics of Playa Verde—and why he believes the updated work has helped validate the project as Halo moves towards a potential Final Investment Decision.

Watch the new interview in full by clicking here

What Stood Out?
One of Halo’s most important recent developments we discussed with Nick is without doubt the 5.4% increase in Playa Verde’s Ore Reserves, from 32.2Mt to 33.94Mt at 0.25% copper, containing 83,626 tonnes of copper.

The wider onshore Mineral Resource, meanwhile. remains significantly larger at 53.44Mt, while the consultants have also identified preliminary potential to increase Ore Reserves by a further 25–30%, subject to additional work.

In our interview, Nick also highlighted the Halo’s latest cost work at the project.

Initial CAPEX has increased from $86.8m to $92.8m, but importantly, that figure is only around 3.5% above the estimate contained in the 2016 DFS despite a decade of mining-sector inflation.

Operating costs have also barely moved, from $2.19/lb to $2.20/lb of copper, while further optimisation could potentially reduce CAPEX by $6–10m and lower sulphuric acid costs.
Those optimisation opportunities also feed directly into the project economics:

• At a 10% discount rate, the Ore Reserve base case generates an after-tax NPV of $174.3m and a 45.6% IRR.

• An Optimised Reserve case, incorporating a $6m CAPEX saving and lower acid costs, lifts that to $190.6m and 51%.

• Using the full 53.44Mt onshore Mineral Resource increases NPV10 to $267.5m, while the optimised full-resource case reaches $295.5m with a 54% IRR.

There may also be another, smaller optimisation opportunity: changing the dredging starting point and extraction sequence could add around $4.4m to project NPV.

Nick’s note places a 47p per share fair value on Halo using an 8% discount rate, compared with 7.2p at the time of publication,

The Next Steps
Our discussion with Nick also covered financing, permitting and the remaining milestones towards FID.

He pointed to a range of potential funding routes beyond straightforward equity, including debt, offtake-linked prepayments, royalties or streaming, equipment finance and strategic investment.

And since publication of the note, Halo has also received its Article 17 mining permit, another important step as the project moves forward.

We believe the key now is execution.

If Halo can continue advancing optimisation, financing and reserve conversion towards FID, there’s a clear route for the valuation story to keep developing.
For more on Halo and Playa Verde:

• Watch our latest interview with Nick Hatch

• Read Equity Development’s latest research note

• View Halo Minerals’ latest corporate presentation