GREY:NEVDQ - Post by User
Post by
Notgnuon Oct 11, 2021 1:55pm
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Post# 33995354
Using the bullish case for copper >>>>>>
Using the bullish case for copper >>>>>>If we see $5.00 copper, and for a variety of reasons including the spike in oil prices (itself likely due to climate policy induced reduction in oil production investment) it is a sustainable price in the longer term, then NCU could really benefit.
In this scenario governments and influential international bodies have two policy directions to take. 1) back off on climate initiatives to encourage more oil production again and thereby allow for thing like refridgeration in Lebenon etc. or 2) lean in on the switch to new electricty based tech by providing indirect and direct subsidies to encourage the switch to happen faster.
Politically I am not taking a position here but if door #2 is chosen then Goldman's target of $5.00 copper by the end of 2021...
https://www.mining.com/goldman-recapitulates-5-a-pound-copper-price-by-end-2021/
... may not only become reality, it may translate into a long term reality, with mine capacity increases being increasingly difficult to actualize.
What does this mean for NCU?
Well, (long-term, with the open pit) 280 million pounds per year at about $3.00 profit ($5.00 minus $2.00 cost) is $840 million per year in cash-flow. It would cost about one billion dollars to get there but at that metric, and say a 10 X cash flow multiple (at that scale) then you are looking at about a $7 billion dollar company (even after deducting $1.4 billion for the pit if it were debt financed.)
$7 billion in that imaginary scenario, divided by say 240 million diluted share base is $29.17 per share... Not bad (work?) if you can hang on to it a few years.
Cheers,
N