Copper Stocks: Short-Term Pain for Long-Term Gain

Stockpiles of copper registered with the London Metal Exchange (LME) more than doubled this summer and were at their highest level since May 2022 in September.

Despite that, just one month later, an informal poll of 800 people attending LME Week in London found that 53% believed the red metal needed for the green energy revolution would be the metal with the most upside price potential next year, according to Reuters.

Copper will be "THE bullish energy transition trade within commodities," said Max Layton of Citi during an analysts' debate, the report said.

Tin came in a distant second in the survey with 23%.

Copper will be "THE bullish energy transition trade within commodities," said Max Layton of Citi during an analysts' debate.

Analysts said several companies — including World Copper Ltd., Granite Creek Copper Ltd., and Fabled Copper Corp. — could be there to reap the benefits of that upside.

The International Copper Study Group met in Lisbon, Portugal, last month, and found that stockpiles are expected to grow, and 2024 could see a surplus of about 467,000 pounds of copper on the market as a consequence of higher supply from new or expanded mines.

"Although the global economic outlook is challenging, an expected improvement in manufacturing activity, the ongoing energy transition and the development of new semis production capacity in various countries should support higher growth in world refined usage in 2024," the group wrote in a release.

The Catalyst: Deficits Will Grow

Copper (Cu) prices haven't moved much since spiking earlier this year, but BMI analysts believe deficits could still grow at an extreme pace over the coming decade as the clean energy revolution takes hold, predicting prices of US$11,500 per ton by 2032. Copper's price was US$8,030 per ton " Friday morning.

"In the longer term, we expect the copper market to remain in deficit as the green transition accelerates along with the demand for 'green' metals, including copper," BMI's analysts said, according to Stockhead.

EVs use more than three times as much copper as gas-burning cars. New copper production — and investment in exploration — will be needed to fuel the supply of those vehicles long-term, analysts have said.

"In the longer term, we expect the copper market to remain in deficit as the green transition accelerates along with the demand for 'green' metals, including copper," BMI's analysts said, according to Stockhead.

"Based on industry-wide capital intensity data, we calculate that some US$196 billion of investment will be required," a market analysis issued by RFC Ambrian said. "Of this, US$80 billion is for greenfield projects, and US$116 billion is for brownfield projects, of which US$71 billion is simply for replacement capacity. A further US$35 billion of investment will be required to close the supply gap."

An S&P report called copper "one of the most underappreciated critical minerals." 

"Deeper electrification requires wires, and wires are primarily made from copper," the report said.

Billionaire Robert Friedland, founder and executive co-chairman of Ivanhoe Mines Ltd., recently told Bloomberg that he fears copper prices could jump tenfold eventually.

"We're heading for a train wreck here," he said.

World Copper Ltd.

One company that could benefit from a future spike in copper prices is Vancouver-based World Copper Ltd. (WCU:TSX.V;WCUFF:OTCQX; 7LY0:FRA), which is focused on the exploration and development of its copper porphyry projects: Escalones and Cristal in Chile, and Zonia in Arizona.

Taylor Combaluzier of Red Cloud Securities has rated the stock a Buy with a target of CA$2.15. He said World Copper has "transformed from an explorer into a developer with a portfolio of high-quality copper projects in premiere copper mining jurisdictions.

"We believe Escalones shows compelling economics when compared to other copper development projects and that it offers lots of potential for resource expansion," he wrote. "Additionally, we believe Zonia has lots of untapped potential, as it could either be rapidly developed for nearer-term production or potentially be expanded through exploration to increase the scale of the project."

Zacks Small-Cap Research analyst Steven Ralston has a CA$0.59 per share target price on the junior mining company. Its share price on Friday, in comparison, was CA$0.065 per share, implying a potential return for investors of more than 800%.

Earlier this year, World Copper filed an updated mineral resource estimate (MRE) for Zonia. It increased total resources by about 90% to about 198 million tonnes from a 2017 estimate, with contained copper increasing by 55% to about 1.03 billion pounds.

Escalones is about 100 kilometers from Santiago. Its PEA (preliminary economic assessment) estimates an inferred resource of 426 million tonnes of 0.367% copper, containing 3,447 pounds of copper.

Coming catalysts include permitting for Escalones and a preliminary feasibility study (PFS) of Zonia's main deposit.

Wealth Minerals Ltd. (WML:TSX.V; WMLLF:OTCQB) owns about 15.8% of World Copper or about 19.2 million shares. About 27% is owned by management and insiders, including Director Robert Kopple with 11.84% or 14.8 million shares and Board Chairman Hendrik van Alphen with 2.67% or 3.25 million shares. CEO Peterson said he holds about 700,000 shares. The rest is retail.

Its market cap is CA$8.13 million. It has 125 million shares outstanding, including 87.2 million of them free-floating. It trades in a 52-week range of CA$0.26 and CA$0.07.

Granite Creek Copper Ltd.

Another play for copper is Granite Creek Copper Ltd. (GCX:TSX.V; GCXXF:OTCQB), "a Canadian exploration company focused on the acquisition and development of highly prospective brownfields assets in top districts of favorable North American mining jurisdictions," according to its website. It is a member of the Metallic Group of Companies, along with Metallic Minerals and Stillwater Critical Minerals.

Per a 2023 PEA, its Carmacks Project has the potential for significant additional cash flow from the processing of oxide tailings to increase total copper recovery.

The company has also identified additional near-mine exploration targets that have the potential to increase the resource from the current 36 million tonnes grading around 1.07% copper equivalent.  The project currently has a mine life of nine years, at 7,000 tonnes per day (TPD), and any further expansion into the surrounding area could significantly extend that operational lifespan.

Recently, the company announced the preliminary results of a metallurgical study designed to increase the recovery of copper from oxide material at Carmacks, with up to 81% of the copper present in the test samples going into solution.

A Couloir Capital research report referred to Granite Creek Copper as a "promising base metals explorer with a near-term target of reaching a billion pounds of copper at its Carmacks Copper Project."

Bob Moriarty of 321gold.com said Granite Greek was "a really easy call."

"Green energy requires enormous quantities of copper, lithium, and graphite, far more than today," Moriarty wrote. "Prices will have to go up. Granite Creek Copper is in the catbird’s seat, ready to move to production."

Moriarty wrote that he's "not a big expert on copper, but Granite has to be one of the lowest market cap copper stories with a real asset."

Management and insiders own 5.71% of the company. Timothy Johnson owns 2.54% of the company with 4.08 million shares, Robert Sennott owns 1.84% with 2.96 million shares, Michael Victor Rowley owns 1.07% with 1.71 million shares, and John Charles Richard Cumming owns 0.26% with 0.42 million shares.

There are 160.77 million shares outstanding, with 151.59 million free-float traded shares. The company has a market cap of CA$5.63 million. It trades in the 52-week period between CA$0.03 and CA$0.105.

Fabled Copper Corp.

Fabled Copper Corp. (FABL:CSE) has continually seen high grades of copper in fieldwork results from its Muskwa Project in British Columbia.

One float sample taken at about 1,600 meters elevation contained massive sulfides and quartz veining with 60% chalcopyrite, 3% bornite, and 23.4% copper (Cu). Another sample at the western side of the occurrence found "a staggering" 29.3% Cu.

"We're finding all this high-grade mineralization," President and Chief Executive Officer Peter Hawley said. "So that's a pretty good hint that, you know, we're, we're very close to the source . . .  It's not very often you see high-grade numbers like this."

Muskwa is in northwestern British Columbia near the Yukon border. It consists of the Toro, Bronson, and Neil claim blocks. All three were explored in the early 1970s before rockslides and snowfields arrested further development. One vein was developed and partly mined — 498,000 tons were milled with a head grade of about 3% Cu.

On the same day as the 29.3% Cu sample, 11 other samples were collected over an altitude of 158 meters. Of the 12 collected, 11 assayed greater than 0.5% Cu, seven greater than 10% Cu, and four greater than 20% Cu.

Fabled has applied for 15 drill sites at the project, including four in the Eagle Vein area. Negotiations with First Nations continue.

According to Yahoo Finance, about 3% of the company is held by insiders. They include Director Luc Pelchat with 1.19% or 210,000 shares, David Smalley with 0.86% or 150,000 shares, and President and CEO Hawley with 0.65% or 110,000 shares, Reuters said.

The rest, 97%, is retail.

Fabled Copper's market cap is CA$870,000, with 21.75 million shares outstanding, 21.28 million of them floating. It trades in a 52-week range of CA$0.105 and CA$0.03.

Important Disclosures:

1.  World Copper Ltd., Granite Creek Copper Ltd., and Fabled Copper Corp. are billboard sponsors of Streetwise Reports and pays SWR a monthly sponsorship fee between US$4,000 and US$5,000. In addition, Fabled Copper Corp. has a consulting relationship with an affiliate of Streetwise Reports, and pays a monthly consulting fee between US$8,000 and US$20,000. 
2. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Fabled Copper Corp.
3. Steve Sobek wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an employee.
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