Baja Mining is squarely focused on advancing its Boleo project (copper,cobalt, zinc, manganese) located in Baja Sur, Mexico towards production. Boleo is located along the east coast of the Baja peninsula about 850 km south of San Diego, California. The Baja team is led by President John Greenslade. Mr. Greenslade spent a number of years with the predecessor of Placer Dome before going on to law school and the start of his own law firm specializing in securities law and mining projects. Mr. Greenslade is ably assisted by VP of Engineering Michael Shaw. Mr. Shaw has spent his long and successful career with a focus on mainly Latin American mining projects.

Boleo – $700 million Project NPV

The Boleo property has a long history that dates back to the late 1800's when local ranchers noted mineralized copper outcroppings. From 1884 to 1934 a French firm (financed by the Rothschilds) mined higher grade ore using underground methods but made no attempt to recover the contained cobalt or zinc. From 1935 to 1984 there were a number of other sporadic attempts at mining with ore being sold to a nearby smelter at Santa Rosalia. In 1992 John Greenslade acquired the property and optioned it out to a Canadian firm called International Curator who spent $23 million on exploration. In 2001 with metals prices low, International Curator relinquished their option and 100% ownership reverted back to John Greenslade. In 2004, Mr. Greenslade rolled the property into a publicly traded entity that today is recognized as Baja Mining and he has not looked back since.

A 2007 Technical Report and Feasibility Study outlined a measured and indicated resource of 277 million tonnes of mineralized material in an open-pitable area and 147 million tonnes of ore in an underground seam. The open-pitable deposit was noted to contain a further inferred resource of 253.2 million tonnes and the underground seam a further inferred resource of 85.6 million tonnes.

The Boleo project promises to be a unique engineering project. The mineralization is contained in a clay-like structure which is unique in the world of mining. The Feasibility Study outlines how ore will be leached and how the leachate solution will pass through a Direct Solvent Extraction Process (DSX) to remove the manganese. Remaining solution will then pass through four separate solvent extraction circuits, two electrowinning circuits and a fluid bed drying system to produce high quality copper, cobalt and zinc sulphate. The proposed process plant will treat 3.1 million tonnes of ore per year and produce up to 60,000 tonnes of copper, up to 3,100 tonnes of cobalt and 36,000 tonnes of zinc sulphate crystalline salts. With the addition of a few additional processing steps, up to 100,000 tonnes per year of manganese carbonate could be produced. Manganese aside for the moment, the Feasibility Study concluded by noting that at a base case of $1.50/lb copper, $15/lb cobalt and $1200/tonne zinc sulphate, the Boleo project over a 25 year mine life will generate a positive project NPV(8%) of $700 million. Using more current metals prices of $3.00 copper and $25 cobalt boosts the NPV(8%) to a very lucrative $1.6 billion.

Baja Takes on a Development Partner

The capital cost of assembling the Boleo project is estimated at near $890 million. The only smart way to finance such a large amount is to take on a partner. And this is exactly what Baja has done with its agreement with a Korean consortium for a financing package of up to $435 million in exchange for a 30% interest in Baja Mining's Mexican subsidiary Minera y Metalurgica del Boleo and the right to offtake 30% of production on commercial terms. The balance of the funding requirements will come from a combination of debt and equity financing.

Baja - Doing The Math

Baja Mining currently has just over 142 million basic shares outstanding. There are a further 9.5 million options and 31 million warrants outstanding to give a fully diluted share structure of about 182 million shares. At current prices of C$1.40, Baja has a market cap of about $254 million. If one takes the base case NPV for the Boleo project as being $700 million and divides by the fully diluted share structure the result is about $3.84 a share – considerably higher than where Baja is trading at right now.

Put Baja Mining on Your Radar Screen

At The Market Traders, we are intrigued with what Baja has at its Boleo project. Our advice on Baja Mining right now is to buy the dips and start building a position in the stock. In these cruel markets, it would appear that Baja is not being properly valued given that project financing is not all firmly in place. However, all one need do is look at what the Korean consortium has done. The serious interest taken in this project by this Korean group will most certainly lead to financing avenues opening up quite soon. Once financing is firmly nailed down, we feel the markets will move to better express the inherent value in Baja Mining which implies much higher prices on the horizon for Baja Mining. Pay close attention and don't let this one get away on you.

The Commodity Supercycle Report (a publication of Brookhaven Advisors LLC) is protected by copyright law. Corporations, websites, newsletters or individuals seeking to copy, distribute or otherwise disseminate the contents of this report or any of our other writings in part or in whole are welcome to do so upon obtaining our prior written permission and paying a reproduction fee of US$500. Anyone seeking to avoid doing so is 'itchin for a nasty fight. The information contained herein does not necessarily constitute a solicitation to buy or sell. Consult with your financial advisor to ensure any securities mentioned herein meet with your investment objectives. Principals of Brookhaven Advisors may or may not hold any securities mentioned herein.