AW1 Technical Analysis, page-2323

Why Hedge Funds Invest in Early Stage Copper Deposits: Unveiling the Motives

Several compelling motives drive hedge funds like Taurus Funds to invest in early-stage copper deposits like the Storm Copper Project before the maiden resource estimate:

Early Bird Gets the Worm:

• Securing high-potential assets: By entering early, hedge funds like Taurus gain access to potentially lucrative projects before major competition drives up the price. This is crucial, especially for large sedimentary deposits with significant long-term potential.
• Favourable or Discounted entry terms: Early involvement allows for potentially better deal terms compared to later stages when the project's value becomes clearer. This could involve lower royalty rates, additional rights, or even equity stakes.

Income and Diversification:

• Steady cash flow: As you mentioned, Taurus seeks semi-annual income. Royalties provide a reliable income stream throughout the mine's life, independent of copper or zinc prices. This diversifies their portfolio and mitigates market fluctuations.
• Exposure to real assets: Copper is a critical industrial metal with strong demand, especially in renewable energy and electric vehicles. Investing in a copper project provides exposure to this growing market and diversifies away from traditional assets like stocks and bonds.

Long-Term Growth Potential:

• High-grade potential: Sedimentary copper deposits can be large and high-grade, offering significant upside potential. Taurus might be betting on the Storm project's potential to become a major copper producer, leading to substantial long-term returns.
• Exploration upside: Early investment allows for participation in future exploration successes that could expand the resource estimate, especially during 2024, and hence increase the project value. This further increases the potential for long-term capital appreciation.

Confidence in the Project:

• Experienced management: Taurus might be impressed by AW1 & BAY's track record and expertise in copper exploration and development. This confidence in the team increases their trust in the project's potential.
• Favourable geology: The Storm project's geological features, like its vast size and grade potential (both shallow & deep), might be highly appealing to Taurus. This strengthens their belief in the project's feasibility and future success.

Beyond the Obvious:

• Structured Equity: Taurus mentions "Structured Equity," which could involve additional benefits like warrants or conversion rights. These can provide additional upside potential beyond the royalty stream.
• Strategic partnerships: Early involvement can forge valuable partnerships with the project developers, potentially leading to future collaboration opportunities.

In conclusion, while investing in early-stage mining projects carries inherent risks, hedge funds like Taurus are attracted by the potential for high returns, steady income, and diversification. Their decision to invest in the Storm Copper Project reflects their confidence in the project's potential and their ability to secure favourable terms at this early stage.

It's important to remember that the success of any mining project, including the Storm Copper Project, is never guaranteed. However, by understanding the motives behind hedge fund investments like Taurus', we can gain valuable insights into the factors that drive decision-making in the resource exploration and development sector.