The real question is what market cap does this level at out now. It was priced dirt cheap at 10-13m or so because there was a market assumption this is never going ahead. Now we have offers of debt funding, the capex to get the ball rolling is really low (I actually think this is the lowest capex on the ASX copper juniors, next closest is kanmantoo I believe, correct me if I am wrong someone). Working capital can be raised or borrowed later at a much better position.
My biggest fear with this was dilution and today's announcement implies that might not be an issue. Of course we have to wait for something binding but today's announcement is substantially de-risking especially when combined with the broader story taking place in copper. I'll copy-paste in a post I made about the copper macro on another copper stock:
The thing about the demand side is that copper is not as tied to electric vehicles as one might think. Sure, it will get a massive boost from the bull case scenario for EV's, but it actually derives use-cases from all over the economy.
Here's just a few:
- Electrical infrastructure
- War
- Pipelines
- Home construction
- AppliancesThere's very few substitutes for it as well. So while demand temporarily can slow from china, on a long term basis the supply and demand metrics swing heavily in it's favor. We haven't even gotten around to the industrialization of India, the middle east or Africa yet.1.5 billion people in India and very little of the country is industrialized like china. Modi has outlined numerous ambitious targets of which even a fraction coming to fruition will assist in strengthening the copper price even if china's economy slows (which is questionable in of itself, the west is very biased to report things as worse than they are).
https://aheadoftheherd.com/copper-con/
https://aheadoftheherd.com/biggest-copper-mines-produced-20-less-copper-in-2023-richard-mills/There's plenty to note in here and for anyone interested in copper you'll love the depth in both articles, but the key takeaways are things like this.
India, with its 1.36 billion people, is presently using just 0.4 kg of copper per person. The country is modernizing and needs to invest heavily in electrical power infrastructure. According to the International Energy Agency (IEA), India’s power production will need to rise by up to 20% annually to keep pace with its economic and population growth. Just meeting the required power target would double India’s annual copper consumption.And all of this occurs against a backdrop of declining grades and increasing depth. The copper long term narrative is underpinning one of the most unstoppable investment narratives of the next 20 years. It has very little to do with EV's and a lot more to do with demographics. And demographics are destiny.
- If the world continues to industrialize anywhere close to predicted rates then more copper is needed, period.
- If there is a severe economic shock that stops that on a small scale (for example just china) other countries are going to take up the slack and it's still bullish.
- If there is a severe economic shock that hits everyone globally, you're likely to see war. (which as Friedland explained in his interviews, dramatically removes copper permanently from the supply chain).And all of those scenarios can still be short term events in the bigger picture. This is a thematic that will continue well past 2050. We could have 2 recessions during that time period and the demographics still continue on in favor of copper.
So with all this in mind, I think all copper stocks are going to do tremendously well over a long time period. So I am personally shutting out the short term noise and looking for long term plays, which brought me here.
So the question becomes what level of discount ratio does the market want to apply now that a fair bit of risk is gone and this is waking up. 30m MC? 50?
(20min delay)
