RE:RE:RE:The revenge of (copper) minersSNgu... This video is completely in line with my own long-term bullish thesis on copper.
Short term it is true that the copper futures markets can and will be very volatile particularly as the marginal amount of copper is constrained, thus I am prepared for some wild swings.
Long term I believe copper goes higher and stays high for near to a decade due to the long lived nature of many of the assets that copper will be used in... electric trains, busses, windmills, solar farms, cars, charge grid expansions and the like. At sometime, probably a long way out, world population and economic expansion could easily be impinged and then it is the recyclability of copper that will work against it's supply constraint.
Recyclability is not such an issue now becuase the net balance per replaced item equates to more copper. For each diesel bus removed a new one comes on line with perhaps 3X the copper in it.
Take a look at his numbers on Pumpkin Hollow.
First the 75,000 tons of copper per year will more than double because the previously (below $3.00 copper) open pit would not get developed but above the $3.75 to $4.00 area this is easily expanded and already permitted. Permitting, as most here posters here already know, is a very big deal and is not priced into NCU at all.
Secondly our relatively higher cost per ton, on Gianni Kovacevic's spreadsheet, of $4.700 a ton vs the average of $3,500 a ton works for us rather than against us. This may seem counter intuitive to some potential NCU buyers and it comes down to leverage.
It works this way: When you have a lemonade stands selling the sweetest of lemon nectars for 50 cents a cup (x 1000 cups a day) and the stand across the road also selling at a competitive price and same volume, you say okay am I making more money or is my neighbour making more money? To your horror you find out that your cost is 45 cents (all in) for every cup worth but your damn arch rival get almost free supply and has a cost of only 25 cents. At 1000 cups a day your lemonade stand is worth almost nothing (5 cents profit x 1000) cups x 60 day season = $3000 x 5 times cash flow = $15,000 enterprise value)
The value of your stand is $15,000 but your neighbour's stand could sell to outside share holders for $75,000 (because 25 cents profit is 5X as much as 5 cents profit)
Suddenly it gets really, really hot out and the market also heats up. The price of lemonade goes to $1.50 Your lemonade stand now makes $1.05 per cup and your neighbour makes $1.25 per cup.
Your neighbour's value goes to $375,000 (1000 cups at $1.25 profit X 60 days X5 multiple) and the value of your stand (shares of) goes to (1000 cups at $1.05 profit X 60 days X5 multiple) to $315,000.
So, although your neighbour's stand is worth more currently, your enterprise goes up in value from $15,000 to $315,000 or 2000% with the new lemonade price environment whereas your neighbour's stand goes up from $75,000 to $350,000 or 366% (asuming a long term ability to get $$1.50 per cup of course.)
So the leverage to the increase in the price of lemonade is multiples higher and the leverage to a decrease in price is also much higher. If lemonade were to drop to 40 cents a cup your neighbour stays in business, does okay and lives to see another season whereas you go bankrupt or have to refinance at hugely dilutive terms.
NCU not only benefits hugely this way but also has the ability to drill out more of their 15000 acres and add greatly to the proven and probable resources along the way and yet is still priced assuming about 55 cents a cup of lemonade. The difference is that it is copper and not lemonade so it is far more difficult for new sellers to come in and flood the market.
Thus NCU = huge and under appreciated upside in a long term copper bullish (super-cycle) environment and because of this I see a potential sale at $.75 to $1.25 a share, and if not then I still stick to my previous share price of $0.45 to $0.60 by mid to end of 2021.
Cheers,
Notgnu