 Good day, fellow investors. As copper prices have declined, copper miners have declined significantly, I'm refreshing my models on copper miners and adding new knowledge about new miners to my database. In this video, I will discuss hardware minerals, which is a very interesting copper miner and I'll make some of parts value of it so that you can see how that fits your portfolio and your exposure to copper, which is perhaps the metal of the next decade. Let's start. Hotbase stock price has been very volatile, like miners always are. So is it a buy now? Is it a bargain or it is a value trap? Let's see. We're going to discuss the company, give an overview, the sum of parts value, each company, what is the present value now and then the fundamentals, the value, the exploration and see what would justify hotbase current market capitalization to see how to put that into perspective. So the overview mines mostly in the Americas, Canada, US and then Chile and Peru. Hotbase is a mine builder, which means that they buy a project and then invest into building and creating that mine, which is also very profitable, but also very risky. Further, they have been reducing that and their net debt position is lower by 700 million since 2016, but the stock price didn't go anywhere. So that's very interesting. Low cash costs of their mines lead to high cash flows, which allows them to lower their debt. They have three operating mines, the Constancia Lallor 777 and one big project, which is the Rosemont Project. They have very, very long mine lives, especially the Rosemont Project. So a lot of value still in the ground that has to be taken out. This is their consolidated production profile with the Rosemont Project expected to be ramped up by 2022. There is a lot of growth from today, so 40% increase potential over the long term. There are also some other projects like the Pampa Cancha close to the Constancia mine. So they are working on that, getting the permits. So there is more optionality there. Exploration is something I like to keep for free when it comes to companies. There is a lot they are doing. Probably they will build some of those mines they are exploring now, as that is what they do. But let's keep that as a free bonus when it comes to Hutt Bay. Unfortunately, their zinc production is not that big, but still important and it's not good for zinc prices in 2020, 2021. If we see a recession or slowdown, it will be also bad in 2019. So we can expect lower revenues from zinc in this market and in the next 5 to 10 years. Further, they are selling their precious metals streams to develop those mines. So this lowers the risk when they are developing things, gets them more cash for free. But then later also lowers the revenue in the long term and the optionality to silver and gold prices due to the sold revenues. Let's do a sum of parts value. Let's start with the Constancia mine. It's a flagship asset, has still 17 years of mine life. However, there have been some recovery issues where those fell from 80% to 70%, which are often a big warning for companies, as it can be very costly to improve recoveries. Nevertheless, this is the production profile. So since they bought it, they have really improved it and made it more stable and more long term. So this is what they do. They improve built mines. Now it's a pretty low cost mine. Their target is all in sustaining costs are expected to be at 1.72. And as there is always something going on there, recoveries, whatever, I'll put the all in sustaining costs at 2 to be conservative in my investing model. So when I put all that into the model, I get to 700 million in pre-tax present value. After the 30% Peruvian tax, I am at 509 million at copper prices at 2.5. This is their cash costs. They're from the technical report that I have used to make my model. However, if I use a more realistic estimation with costs at $1.5 up to 2023, when the highest of the production is weighted, and later only two as costs, this gives a present value of 900 million after tax. So this is actually what the management expects. An exuberant expectation with copper at 3 and the same cost expectations and copper at 3.5 from 2023 would lead to 1.1 billion in present value, which is close to the current market gap. So they need copper at 3.5 later, free at from 2023, and they need to reach their mining cost targets. Lallor, mine and 777, those have lower mine lives expected about nine years. I have used again from their technical report for my calculations. And after tax, net present value is 400 million at zinc of one and 267 if zinc falls to 0.7. 777 mine has just three years left, but it is producing cash. So I am going to assume it will be enough to cover some unexpected costs or exploration costs. So about 70 million still to come, but I won't put that into my calculation. Now the Rosemont project, which is the pearl crown jewel of the company. However, the net present value at copper prices at three is 768 million at 10% discount rate is 496 million. I usually use a 15% discount rate, but let's go with their discount rate. And it is not such a profitable project if copper prices remain below three, because Rosemont is a no go at copper at 2.75 because you are not going to spend 1.8 billion in developing something to get the net present value of 412 million at an internal rate of return of just 12.5%. So usually miners need an internal rate of return of at least 20. Thus for Rosemont, long term copper prices should be at 3.5, which is a little bit stretched, but perhaps in the long term can happen. Nevertheless, though copper prices are not even close to 3.5 now. So think of it this way. To build a mine like this, you need 1.8 billion, which leads to 144 million in interest payments per year at 8%. Interest payments are not included in the technical reports and net present values. So subtract the interest costs and you are quickly in negative territory for value. The Rosemont project is still also in permitting phase with the net present value at 8% for Hutt Bay that already sold some royalties on it. And just to compare, recently ZIN mining acquired Neveson for 1.4 billion, 1.2 billion when we exclude the value and the cash in Eritrea. So the net present value of TMock upper zone was 1.8 billion, not even discussing the potential tier one lower zone and other exploration, plus construction there is already in progress. So at the 50% discount to the net present value at this stage, Rosemont should be valued around 360 million. So that is at copper at 3, not more for Rosemont at this stage. Exploration, a lot of exploration, near pit exploration, which is the most profitable, they are doing that with every mine that they have. They have a lot of exploration around the world and something might get out of that, but hopefully it will be better than Rosemont. If I look at the fundamentals, if I look at their debt, without the operating assets, the value on their balance sheet is minus 1.18 billion. So when I add the value of the assets, Constancia, 516 million, Lallor, 267, Rosemont, 200 or less at current copper prices, I get to a value for Hutt Bay of negative 197 million. Compare that to the 1.1 billion in market cap and you get the picture. Now what would justify Hutt Bay's market cap? If I push Constancia to free copper for the long term, I get to 1 billion and if I lower my discount rate of 15%, which is crazy, but I like to use it. Because I target 15% returns as a minimum for my portfolio, I get to 1.38 billion for Constancia. Also Rosemont increases at higher copper prices to 1.1 billion and even 1.5 billion later at copper 3.5. So we are at above 2 billion for Hutt Bay with the discount on Rosemont, so that's still just 50% upside. So that's not really that much and we know that Neveson went for much lower in a bidding war for a high grade asset with amazing short term prospects, high cash flows in the beginning. So my conclusion is that I'm not interested in Hutt Bay. I just made a video on London, which I think is a better risk reward, better positioned, much cheaper in comparison to Hutt Bay and much less risk for similar upsides. So not interested in Hutt Bay too much ifs, ifs and ifs. And even if those ifs materialize, then again the market cap is already higher. So there could be a lot more downside for Hutt Bay if copper prices go down. So keep that in mind if you are invested in Hutt Bay. Thank you for watching. Please subscribe. I'll, as will dig, much more into gold miners. I'll still have 10 detailed analysis of copper miners that I have to refresh my models or do complete new reports. So please subscribe to the channel to get more info about that. And if you really like how I approach valuing miners, and I do that also with all other companies that I look around the world where there are opportunities, please check my stock market research platform. The link is in the description below and do that before the end of this year because after that I'm raising the price in order to avoid crowded trades and too many people on the platform. Thank you for watching, looking forward to your comments and I'll see you in the next video.