One that does pop out though is Caravel Minerals (ASX:CVV). It has been trading at 22c for a market cap of $92m. Along with the other copper juniors, it is on “sale’’ in that it was trading at 31c at the start of the year.
The porphyry copper mineralisation at the namesake project near the town of Wongan Hills in Western Australia’s central wheatbelt region was only discovered in 2010 but now stands as a 2.84 million tonne copper resource.
Caravel’s current market cap does not match the scale of the resource, primarily because the market has trouble getting its head around the 0.24% grade of the copper mineralisation. The local market in particular has been brought up on much higher copper higher grades.
But by holding back on Caravel, the market is overlooking the fact that Caravel’s grade is pretty much the average grade of the North American copper industry. The focus should be on whether a project can turn a dollar or not through the cycle, and there are plenty of examples of much higher grade copper mines struggling to do just that.
As it happens…
Caravel fits the bill thanks to low mining costs, excellent metallurgy, and the infrastructure/power benefits of its location.
All that came through in a recently updated pre-feasibility study update that lowered the all-in sustaining cost estimate to $US2.37/lb. Spread that across planned output of 60,000t of copper-in-concentrates annually, and Caravel will have serious earnings power.
That is particularly so if copper prices do take off as 2025 approaches. A US50c increase in the copper price would add $1 billion to the project’s net present value, currently estimated at $1.3-$1.7b.
Before all that though, there is a $1.2 billion capital expenditure requirement to get the 30-year project into production. A big ask for a company with a $92m market cap.
But the coming supply cliff means there is lots of scope for financing-linked offtake agreements, a strategic joint venture deal with a partner with deep pockets, and/or a selldown of project equity.
Garimpeiro checked in with Caravel executive director Alasdair Cooke on that score during the week.
“We have said no to a few offers and we will just keep looking until we find a match that looks good. We are focused on getting an alignment with a smelter or a trader who doesn’t want control and who can add value to the project by assisting in the finance,’’ Cooke said.
“All of the producers and traders are very much aware of the coming supply cliff in copper. A couple of years out, the level of demand rapidly outstrips the level of supply.’’
The article in the west is expanded in BF's regular column that won't stand a link.
For those with patience, CVV has the resource to back up 30+-years, and probable mineability of said resource.
AC has a lot of 'skin in the game' and along with fellow director RM added more recently. Always good to see this sort of faith from some of the BOD members. Can't recall if I posted this before but worth noting RM's willingness to put up $100K for something he originally thought would not work.
[Yes RM's were 8c options but still $100K to CVV]
AC's comments about saying no to some offers means they have to wait for something more suitable. Hopefully such exists.
Quite a few companies are resource rich and cash poor looking for a white knight.
(20min delay)