Copper is an essential component in renewable energy, used in electric vehicles, wind turbines, and photovoltaic cells for solar. In addition, the metal has plenty of other industrial uses, construction, and power lines, to name a few. Demand is rising, and supply is unable to keep up.
Demand for Copper
Natural resources investment firm Goehring & Rozencwajg reports that “the number of new world-class discoveries coming online will decline substantially, and depletion problems at existing mines will accelerate.” Bank of America Global Research analysts expects copper to flip into a deficit from 2025.
"We believe World Copper remains undervalued, and the positive economics outlined in this PEA could potentially help re-rate the stock," said Combaluzier from Red Cloud.
World Copper Ltd. (WCU:TSX.V; WCUFF:OTCQB) is unusual in the world of small caps in that this US$22 million market cap firm has two copper projects with resource estimates in hand, and this has caught the attention of numerous industry analysts.
The company has two assets that are in near-term development.
Nolan Peterson, World Copper’s CEO and president told Streetwise Reports, "Because they are oxide, SX-EW solvent extraction, and electricwinning heap-leach operations, that means they come with a lower initial capital, they have a lower environmental and infrastructure footprint, and that means they can be permitted more easily.”
Escalones
World Copper’s flagship project, 100%-owned Escalones, which is located in Chile about 100km from Santiago, has a preliminary economic assessment (PEA). Released in February of this year, the report estimates an Inferred resource of 426 million tonnes of 0.367% copper, containing 3,447 million pounds of the metal. The PEA highlighted a US$1.499 billion after-tax NVP8 at a long-term copper price of US$3.60/lb. It featured an after-tax internal rate of return of 46.2% and a payback of 2.18 years.
CEO Peterson stated, “The exceptional results of the Escalones PEA confirm what we at World Copper have always believed—that Escalones has the potential to be one of the most impressive copper properties in South America. Escalones now joins a peer group of large-scale, study-backed, development-stage assets.”
He noted that Escalones has several attributes that “make it attractive for development, including robust economics, strong value metrics, and the potential of rapid returns for a comparably low capital investment.
These factors combine, leading to a profitability index in the top quartile of peer group companies with a capital intensity in the bottom quartile. Furthermore, the project’s lowest quartile position on the global cash cost curve indicates profitability in even the weakest copper market scenarios. The results of the PEA, combined with Escalones’ large land package and resource expansion potential, make it a truly outstanding project.”
"We believe the PEA puts WCU in a strong position to attract JV/financing partners," wrote Fundamental Research Corp.'s Sid Rajeev.
This sentiment was echoed by industry analysts. Taylor Combaluzier, a mining analyst with Red Cloud Securities, when he wrote on February 16, after the release of the Escalones PEA, that he views "this as a compelling PEA that demonstrates Escalones could support an oxide heap-leach operation. We are impressed with the reasonable initial capital costs, which results in a capital intensity index of ~US$8,416/t Cu versus peers with an average of ~US$15,000/t Cu. We believe World Copper remains undervalued, and the positive economics outlined in this PEA could potentially help re-rate the stock.”
Fundamental Research Corp.’s Head of Research Sid Rajeev wrote on February 18, “The PEA was stronger than expected as CAPEX/OPEX estimates are lower, and mine-life is higher than our estimates . . . WCU is trading at just 5% of the combined AT-NPV8% of Escalones and Zonia at US$3/lb copper. We estimate that juniors are currently trading between 20%–40% of AT-NPV . . . We believe the PEA puts WCU in a strong position to attract JV/financing partners.”
The company has been drilling to expand the resource at Escalones and, in late September, reported that drilling to the south of the resource, in the Mancha Amarilla zone, has confirmed that the mineralization extends into the area.
CEO Peterson explained, “With the completion of the first phase of the drill program, we have now confirmed what initial reviews indicated — that the Escalones resource has the potential to be significantly larger than its current definition, with oxide mineralization to similar depths as the main deposit. With the western edge of the Mancha Amarilla footprint defined, we now have clear targets for the next phase of drilling, aiming to increase the grade of the overall resource as we test the flanking skarn targets, which exhibit some of the highest grades on the property.”
Zonia
The company’s second project, Zonia, is located in central Arizona, about 100 miles from Phoenix. The resource was acquired in February when World Copper and Cardero Resource Corp. agreed to combine their businesses.
The past-producing mine saw the production of 33.2 million pounds of cement copper from 1966 to 1975.
Some 50,000 meters of drilling have defined a near-surface copper-oxide resource.
Arizona produces around 71% of the copper supply in the United States in 10 mines operated by major companies such as Freeport-McMoRan, Capstone, ASARCO, and KGHM. The 2021 Fraser Institute survey ranked the state as the fifth most attractive mining destination in the world. Resolution Copper, a Rio Tinto–BHP joint venture, is one of the largest undeveloped copper projects in the world and could become North America’s largest copper producer.
A PEA released in 2018 estimated Measured and Indicated resources of 77 million short tons grading 0.33% copper, containing 510 million pounds of copper, and an Inferred resource of 27 million short tons grading 0.28% copper, containing 154.6 million pounds of copper. The after-tax net present value of 8% (NVP8) was calculated at US$192 million, with a 2.9-year payback of initial capital.
The PEA also estimated initial capital at US$198 million and operating costs of US$1.46/lb copper.
The project also offers lots of potential for expansion. In May, the company reported that three potential growth drivers are 1) step-out drilling from the current resource could enlarge the outlined mineralization, 2) Zonia Norte, a porphyry exploration target, offers the potential of discovery for a new deposit, and 3) an updated PEA could include material excluded from the 2018 iteration and could reassess the resource under current market conditions.
Ownership, Coverage, and Share Structure
World Copper has approximately 112.5 million shares issued and outstanding and 154 million fully diluted. In the last year, shares have traded between CA$0.18 and CA$0.89.
The company is followed by analysts Taylor Combaluzier of Red Cloud Securities, Siddharth Rajeev of Fundamental Research Corp., and Steven Ralston of Zacks Investment Research. Newsletter writers and also follow the stock. Click "See More Live Data" in the data box above to view the company's latest updates.
Wealth Minerals Ltd. owns approximately 18% of the company; management and insiders own 24%, including director Robert Kopple’s 13% stake. Mackenzie Financial Corp. owns approximately 8% of the float.
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Additional disclosures:
Red Cloud Securities Inc. is registered as an Investment Dealer in all Canadian provinces and territories, and is a member of the Investment Industry Organization of Canada (IIROC). Part of Red Cloud Securities Inc.'s business is to connect mining companies with suitable investors. Red Cloud Securities Inc., its affiliates and their respective officers, directors, representatives, researchers and members of their families may hold positions in the companies mentioned in this document and may buy and/or sell their securities. Additionally, Red Cloud Securities Inc. may have provided in the past, and may provide in the future, certain advisory or corporate finance services and receive financial and other
incentives from issuers as consideration for the provision of such services. In the last 12 months preceding the date of issuance of the research report or recommendation, Red Cloud Securities Inc. has performed investment banking services or has been retained under a service or advisory agreement by the issuer. In the last 12 months, a partner, director or officer of Red Cloud Securities Inc., or the analyst involved in the preparation of the research report has received compensation for investment banking services from the issuer.
Fundamental Research Corp. The analyst and Fundamental Research Corp. “FRC” does not own any shares of the subject company, does not make a market or offer shares for sale of the subject company, and does not have any investment banking business with the subject company. Fees were paid by WCU to FRC. The purpose of the fee is to subsidize the high costs of research and monitoring. FRC takes steps to ensure independence including setting fees in advance and utilizing analysts who must abide by CFA Institute Code of Ethics and Standards of Professional Conduct. Additionally, analysts may not trade in any security under coverage. Our full editorial control of all research, timing of release of the reports, and release of liability for negative reports are protected contractually. To further ensure independence, WCU has agreed to a minimum coverage term including an initial report and three updates. Coverage cannot be unilaterally terminated.
