Hi Upmarket
It is vaguely in line with the feedback I've received from people in the industry (and by that I mean the people that find and dig out the copper not the guys that play money games). It's also vaguely in line with Blackrock's 25% loading of copper (so they're seriously over weight.) If it is even close we will all do very well. I've heard larger copper prices mentioned but I'd be happy with $7000 a tonne anyway...which is more or less where we have spent the past 6 months.
The stories I've heard are that we may see some softness in copper price due to a temporary imagined small surplus and a tough macro but that sometime not long after AVB start production we are likely to see the copper price rising again, substantially. The reasons that have been put forward to me around this theme are as follows:
The stories of over supply may turn out to be fiction as a number of the older large supply sources/mines are actually having some difficulty producing copper at a an economic rate. Some mines are even contemplating shut down or maintenance mode until prices improve.
Even more of the older mines have a finite life span and will approach depletion over coming years. The majors also pulled back on development and exploration after the excesses of the "super cycle" boom years. They had to cut costs and as a consequence we end up back in the polarised too much product/low priced versus not enough product available/much higher commodity price scenario that seems to be the industries pulse.
The good news for AVB is that we will be approaching production then ramping up that production as the shortages start to bite. As the price of copper climbs due to the lack of newly developed mines we will be coming on line. Firstly with Antas North, followed by Pedra Branca and then probably by Sao Pedro or another tenement. Ten years down the track exploration by the majors will perhaps have accelerated and the copper price might start cooling off as we head to the other end of the equation but I suspect most of us will be sipping Pina Coladas on a tropical beach by then...hopefully the directors as well because they will have deserved it.
It takes more than luck to be in the enviable situation I believe we are in. Have you noticed the increasing press about the paucity of experienced miners and the surplus of college graduates that have little or no experience? IMO, our directors are a very well experienced bunch who can take us all to the desired destination. Doesn't mean they're perfect but I suspect they and some of their peers will do a ten times better job than those that have yet to make all the mistakes the newbies need to make. They've already proved their worth by doing the following;
Selecting a world class mining area with tenements available at the time.
Negotiating even more tenements with the majors in a competitive environment.
Exploring and confirming significant copper finds.
Receiving regulatory support and approval.
Establishing commercial relations with significant funds (Glencore/Xtrata, Blackrock and Appian)
Cleaning up their corporate baggage in a a polite and efficient manner. ("well that was a waste of time", most won't understand but for those that do
)
PS The investment bankers aren't predicting these price rises in copper for fun, nor are they starting to hunt good prospective producers to fund for fun. They know where the money will be in the next decade and as the headless chooks cluster saying buy copper miners ten years from now they will be selling and maybe then we should join them...but for now, you'd be mad to sell
PPS Sorry for the rant but I am so over the amateur trader/worried investors (or the trolls intentionally talking the stock down) that keep watching every tick and crying because it doesn't appear to be working. It is working but the average investor will lose patience and their money then look for someone else to blame long before the game is over. I think it is simply human nature and all of us are susceptible to the same emotions etc but the ones that have the wisdom to take the more distant and objective vantage will probably do better than those wrapped up in it. If anyone has done their research why do they get distracted by the noise of the market that is simply designed to impact their fears and take their money? Silly game hey?
Redonred: email me and we can book a beer appointment. The copper price always goes up after the second beer
