Copper Outlook Brightens Despite Gloomy Junior Market
Recent copper analysis sees tighter supplies supporting higher prices, with select juniors revealing promising drill results. But length 16-year develop. timelines temper impact of new finds while country risks buffet certain assets.
- Video discusses copper market outlook and recent drill results
- Notes increased mainstream attention on copper supply tightness
- Ivanhoe Mines raising $500M shows confidence in the copper sector
- New book highlights long timeline from discovery to copper mine production
- Details drill results from several junior copper miners
- Assesses results, share prices, market caps, and option terms for junior miners
Copper Bottomed provides an upbeat outlook on the copper market, even as juniors face a gloomy equity environment. The host highlighted a mainstream Bloomberg article noting copper supplies are suddenly looking scarce, validating this channel's previous warnings. This scarcity helps explain Ivanhoe Mines' ability to raise $500 million, showing institutional confidence in copper. Investor optimism stems from strong demand amid the energy transition and supply struggles. However, a new book warns that the typical 16-year gap from discovery to production means today's finds may not alleviate shortages in time. Still, drill results from several juniors hint at promising deposits.
"It's great that Bloomberg is talking about this but I was talking about these things...back at the end of October," said the host. "I hope this goes to show some of the efficacy of the work that we are doing."
The capital raised by industry leader Ivanhoe validates the sector’s strength.
“$500 million...I’m sure they’ll get filled. Ivanhoe Mines is a great company.” The founder’s increased marketing and tweets signal his confidence too.
Yet supplies may not increase rapidly. As one new book notes, the median timeline from discovery to mine start is 16 years. “If you find something today...it won’t be in production until 2040,” the host explained, warning more shortages are ahead.
There is a decisively bullish mood on the prospects for copper prices. Copper supplies are headed for significant shortages due to the concurrent slowing of new mine investments and expansions alongside soaring demand from electric vehicle proliferation and renewable energy infrastructure buildouts. Mainstream sources finally acknowledge the high likelihood of much tighter copper markets after years of his warnings going unheeded.
However, major supply deficits likely won't emerge for five years. This stems from the typical 16-year timeline from initial discovery to mine production combined with copper projects requiring large upfront capital outlays. So even as today's elevated prices spur more exploration, any discoveries made now probably won't alleviate shortages until the 2030s or later. This sets up conditions supportive of strong prices over at least the next decade.
In terms of investments, streaming and royalty companies are prime ways to gain copper exposure without mining risk. For investors open to volatility, he believes prospect generator companies hold an appeal for diversification across many early-stage assets. Still, country risks around permitting delays persist for exploration plays especially those focused on jurisdictions like Argentina. Overall the host remains adamant that investors increase copper positions before even wider supply-demand imbalances lead to much steeper gains.
Still, drill results provide glimmers of hope. Pampa Metals intersected high-grade copper-gold at a project adjacent to Austral Gold's mines. That’s pretty encouraging. However, tricky option terms requiring $14.75 million in payments and work commitments, along with Argentine political uncertainty, present challenges.
Kodiak Copper expanded its low-grade zone, but it is 3 years without a major discovery, which raises questions.
Pacific Ridge also reported more low-grade copper.
Benton Resources, however, delivered “outstanding” high-grade results including 12.3 meters at 7.2% copper. Its modest $27 million market cap seems disconnected from such impressive grades. The asset also comes with less onerous option terms.
So amid broadly negative junior market sentiment, glimmers of high-grade hope persist. However, investors must remain clear-eyed about lengthy timelines from discovery to production. Continued drilling successes are needed to maintain confidence.
The Investment Thesis for Copper
- Mainstream reports validate warnings of a copper shortage
- Supply growth requires major lead time, supporting prices
- Leader Ivanhoe's capital raise shows institutional enthusiasm
- High grades at Benton's early-stage asset stand out as promising
- But beware of Argentine political/permitting risks (Pampa Metals)
- Monitor drilling progress at Kodiak and Pacific Ridge
- Leverage copper bull thesis via Ivanhoe, but research risks
Pampa Metals intersected high-copper grades at a project next to Austral Gold’s mine in Argentina. However, tricky option terms requiring $14.75M in payments and work commitments put pressure on the $35M market cap company. Plus political uncertainty in Argentina poses permitting risks. But over 400m at 3.8% copper signals exploration potential, if executed quickly.
Kodiak Copper has now spent 3 years and $15M finding large low-grade copper zones but not yet a high-grade core. Recent holes also yielded just 0.17% copper, continuing a worrisome trend of modest grades. With cash and patience dwindling, a pivot in strategy or asset focus may be needed soon.
Pacific Ridge Exploration reported expanding the footprint of its copper-gold mineralized zone but grades remain modest. Recent holes returned 24-28% copper equivalent, largely due to negligible gold and silver. With values below 0.3 g/t, focusing solely on uninspiring copper grades makes more sense. Nonetheless, low grades spreading over wide intervals have management optimistic. However, after 3 years of drilling, investors need a higher bar to justify additional share dilution. Unless clear vectors toward a possible high-grade core emerge quickly, Pacific Ridge’s viability will falter.
Benton's early-stage Great Burnt copper project yielded incredible grades up to 12.3m at 7.2% copper, igniting major resource potential. An inexpensive option deal for the past-producing property also limits dilution risks. As the company compiles more pending assays, it believes the asset harbors a "tremendous upside." Drilling has already expanded mineralization beyond the original small, high-grade resource. Additional meterage and thickness should rapidly increase tonnages. And with volcanogenic massive sulphide deposits economical at just 1-2 million tons, the current $27 million market cap appears disconnected.
Vizsla Copper extended mineralized zones at its Woodjam copper-gold project but admitted the results represent its “strongest copper mineralization to date” after years of subpar findings. The long-suffering stock and struggling exploration strategy have not added value for shareholders, despite management's insistence. With more work targeting extensions of meager grades unlikely to move the needle for investors, expectations for tangible resource expansion should remain muted.
With assay results barely registering copper mineralization, negligible volumes, and 92% stock erosion, MacDonald Mines seems an entirely speculative exploration bet. Its $2 million market cap affords little validation and cash reserves may barely fund keeping the lights on. Without major discoveries made soon, the junior’s prospects appear frail.
After modest activity for years before a recent speculative spike, Sterling Metals now faces the harsh reckoning from marginal drill returns. Neither the grades nor mineralized lengths reported justify much upside to the battered share price. The company’s $5 million valuation leaves little room for error in what constitutes an extremely high-risk venture investment.
Mirasol’s business model focuses more on early-stage project generation rather than targeted exploration of a specific asset. This avoids single-asset risk but also delays meaningful catalysts as partners direct work timing. Still, the company amasses technical expertise and assets spanning South America's prolific mining regions. Its cash and experience offer stability, though shareholders may desire bolder exploration commitments. The stock's subdued multi-year trading range reflects the strategy’s methodical pacing.
In summary, mainstream data back warnings of longer-term copper shortfalls, but Lengthy development timelines prevent new discoveries from quickly alleviating deficits. Still, assets like Benton’s high-grade zones show exciting potential. Investors should track drilling progress at Pampa Metals, Kodiak and others while positioning for copper tailwinds via Ivanhoe equity. Maintaining perspective on risks around politics and execution remains key during volatile times.
Analyst's Notes
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