Two Copper Plays I'm Looking at. Who would you choose?

18th Jan by Anton Crabbe

13 comments 770 reads

Plan to restart Nifty copper mine.

Wating on FID and further funding announcements in FY24.

MER +1.6mt copper over 3 projects with further exploration upside.

Expecting first cash flows within 2-years.

Have debt on the books and just raised equity taking shares outstanding to 1.5bn. Will need to raise more funds to restart mine to start generating cash flow to pay back debt. Plenty of interest in the last cap raise indicating plenty of enthusiasms for the project and raising the remaining funds should not be an issue. Next 12-18 months is where the rubber hits the road (make or break).

AIC Mines (ASX:A1M)

High cost, high grade producer

Need a high copper price to be profitable and stay afloat.

Exploration upside

Will plough any profits and free cash flow back into the ground to increase production and resource size. They need to do this to lower their cost of production and become more profitable. Taking a leaf out of Twiggy Forester's book, as he did the same with Fortescue (ASX:FMG) in the early years.

A1M at this point in time has a much smaller but higher grade deposit and is already producing with plans to expand. CYM is still 1-2 years away from production but has much more copper in the ground and all things being equal should be the lower cost producer.

If you had to choose between the two, who would it be?

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Caper4

18th Jan

Phoenix Copper (LON:PXC) has had problems securing finance but if it does, then expect the share to double immediately, but it appears to be rather a big “if “

Grandslam

19th Jan

I think I'd lean towards AIC Mines (ASX:A1M). They have more cash and as a producer, perhaps more potential to rerate on a rebound in copper prices.

Interestingly, both companies had some director buying late last year at higher prices.

Having said that, I think after the last couple years I'm losing my appetite for investing in junior mining companies.

Anton Crabbe

20th Jan

I'm very tempted too do the same.

Looking at their operating cash flow per share and Cap ex per share. You can see what cash flow they generate they are putting back into the ground, and ave shares on issue have increased from 15m to 384m since 2018. With basically no debt on the balance sheet to speak of, A1M have used equity to fund their expansion to date and will most likely continue to do this.

If they can increase their resource size and maintain a similar grade or slightly lower then long-term they should do well. But there is a lot that has to go right for them in the next few years and by the time that happens their could be a few more hundred million shares on issue.

Form me, I'm happy to take a little piece of them now and wait for their half-yearly report to come out next month and their quarterly activity report in April. Ideally they are producing more and generating more cash flow and had the chance to put more holes in the ground and I can see if they have found more copper and if it might be worth buying more.

21st Apr

Looks like AIC Mines (ASX:A1M) is winning the race currently.

BenHazz

Just an alternative perspective, but is now a good time to invest in junior miners where first copper is still a couple of years out? If you are bullish on copper might it be better to invest in someone like Atalaya Mining (LON:ATYM) where you can be confident any significant upturn in the copper price will be realised as profits and dividends over the next few years, bring up the SP. Sentiment is high amongst many metals in the last month or so, gold, silver, tin and copper in particular but in 3 or 4 years time things could look very different. Personally if I was going to invest in a junior miner I'd be doing it when sentiment was at rock bottom, with the hope I'd get it cheap, and by the time the metal was out if the ground the cyclical nature of commodities had meant it was back in fashion and the price higher.

doctor dave

Neither! Take advantage of the copper price and invest in a mine that is in production.

A1M are a producing miner, that's why their SP is on the up. They are small and capital hungry and need a higher copper price to make money.

Great strategy! There is more than one way to skin a cat in this broad church of investing. One could also say the big end of town (BHP, RIO) with their copper exposure and low A$ will benefit from a higher copper price straight away and get a further kick form a favourable FX rate.

KevinS1

22nd Apr

My copper plays are delivered through two broad investments;

BlackRock World Mining Trust (LON:BRWM) which has about 20%+ in copper investments - it has recently come down to a reasonable valuation with decent discount as the commodity sector has dropped, but is clearly now beginning to show signs of life. It pays a decent dividend which will hopefully grow back to the excellent levels of the last couple of years as the commodity market recovers.

For a pure copper play I use Global X Copper Miners UCITS ETF USD Acc (LON:COPG) which is a global copper ETF. It has had a stagnant couple of years, but has recently rebounded and is doing well.

I no longer pick individual stocks - it is too much of a gamble and much prefer the likes of the above two - albeit Global X Copper Miners UCITS ETF USD Acc (LON:COPG) is a play on a single commodity which is not without risk.

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Keelan Cooper

24th Apr

Hi Anton,

Thanks for posting this! It's great to see some more mining-focused discussion on the site.

AIC Mines (ASX:A1M) looks to be really interesting. High leverage to the spot price is often the best way to play it once momentum shifts in the right direction! Additional upside from exploration is always a nice little bonus too. When you've got a great resource, committing that free cash flow to rapidly develop it in a favourable pricing environment is the only logical thing to do. The great thing about jurisdictions like Australia and Canada is that the infrastructure is already in place to cater for this.

When it comes to UK-listed companies, I'm a big fan of Central Asia Metals (LON:CAML). The management team are excellent operators, and you get some great copper exposure as well as some diversification via its zinc and lead production. My only concern here is growth. There's relatively little visible growth over the coming years unless the company becomes more aggressive with its cash pile and decides to carry out an acquisition. Deciding what to do with a substantial cash pile is always a good problem to have though!

A potentially higher-risk high-reward play would be Jubilee Metals (LON:JLP). Whilst Chrome and PGM's currently make up the vast majority of the company's revenues, it's rapidly ramping up its copper production.

The SA and Zambian-based producer expects to produce between 3,250 - 4,000 metric tonnes of copper this year and up to 13,000 tonnes annually from its Roan operations once the new front-end modular is commissioned in May this year. The work going on to upgrade its 'Sable Refinery' and the potentially transformational 'Waste Rock Project' should provide a further boost to copper production over the medium/long term.

Over in Canada, I know that Hudbay Minerals (TSE:HBM) and Taseko Mines (TSE:TKO) also have some exciting copper development projects in the works. Both companies have been on a tear recently.

Best,
Keelan

25th Apr

An absolute specy of a stock, I have had half an eye on is CopperCorp Resources (CVE:CPER) They are looking for copper and rare earths in Tasmanian Australia, but are listed in Canada.

Thanks for your thoughts there Keelan, much more articulate than myself haha.

Two Copper Plays I'm Looking at. Who would you choose?

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Anton Crabbe

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