Recording date: 2nd November 2023
The Battery Show (Copper Bottomed, Episode 4)
Copper prices hit $3.67/lb this week, up from $3.57/lb last week, partly driven by protests in Panama that threatened production at First Quantum's Cobre Panama mine. The mine contributes nearly 5% of Panama's GDP but protests erupted after the government rapidly passed a law extending First Quantum's mining concession by 20-40 years. The protests highlight political and social risks for mining projects, even major contributors to local economies. The resolution of the protests remains uncertain but Panama relies heavily on Cobre Panama so an extended shutdown seems unlikely.
The copper market faces a 460,000 tonne surplus in 2024 per the International Copper Study Group. However, Anglo and Teck recently cut guidance so the market could balance or even tighten if more mines miss targets. Tightness underscores the asymmetry in copper due to the lack of new mega projects coming online in the next decade.
Filo Mining discovered a new high-grade copper/gold zone outside its main Aurora resource area in Argentina, highlighting expansion potential. However, with a $2.3 billion market cap, significant new discoveries are needed to double Filo's valuation. The resource used relatively high metal price assumptions while the latest results used more conservative prices. More metallurgical work is also needed. Filo is a quality asset but substantial upside is challenging from the current share price.
Lion Copper & Gold hit high-grade copper intercepts but they were 700-900 metres deep, likely requiring underground mining. The results are encouraging but Lion needs to better demonstrate potential to delineate high-grade zones for a lower cost open pit before getting investors excited. More complete drill hole depth disclosure and metric unit reporting would also help.
Meridian Mining discovered a 3+ km long copper/zinc zone near its flagship project which could provide additional mill feed. However, reporting excavation results as copper equivalents based on existing resources is questionable. The potential value from the new zone is also unclear until more detailed economic studies are done. Meridian has upside but still carries risks typical of single-asset junior miners.
The copper market shows signs of emerging tightness but juniors with new discoveries still need to de-risk projects substantially before onboarding large institutional investors. Retail investors with higher risk tolerance may find upside in selecting exploration stories like Filo, Meridian and Lion but expect volatility and invest small amounts as part of a diversified portfolio.
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