Western Copper and Gold Corp T.WRN

Readjusting My Target Price

[EvenSteven27]

I am readjusting my target price. First: it appears obvious that WRN and Rio have been haggling reflected in Paul's gross understatement of the NPV. Second: it is not just supply and demand, as we so erroneously assume (including myself), but a third factor called what the end product user can afford. I believe $2 billion is ridicously low for NPV and $7 billion is realistically too high for NPV. I agree with Heywood that a compromise of $4 or $5 billion NPV might be more amenable.

please see following:

Lithium and copper spark $9bn cost headache for Japan automakers

No relief in sight from rising prices of materials to make cars cleaner and electric 

A vehicle drives on a salt flat in Olaroz, Argentina, a source of lithium for batteries.   © Reuters

RYO ASAYAMA, Nikkei staff writer July 25, 2021 04:30 JSTTOKYO -- Japanese automakers face a multibillion-dollar hit to earnings this fiscal year from rising prices of lithium, copper and other materials crucial to the shift away from polluting cars.

The effect of higher materials costs on operating profits stands to reach about 1 trillion yen ($9 billion) for Japan's six leading car companies, led by Toyota Motor, according company disclosures and estimates by Goldman Sachs Japan. This amounts to about 30% of their total profit forecasts -- and U.S. automakers are feeling the pinch, too.

Tougher auto emissions standards in China and other big markets have driven up demand for these inputs. With the trend expected to continue in the medium term, the auto industry will confront a potentially lasting hurdle to decarbonization.

"Raw material inflation is not going to be something transitory," Honda Motor Chief Financial Officer Kohei Takeuchi has said.

Battery materials have shown some of the sharpest price rises, reflecting the spread of electric vehicles. Lithium carbonate in China -- a price benchmark for the material -- now fetches about 88,000 yuan ($13,600) a ton, more than double the level of a year ago. Cobalt is up roughly 80% in Europe.

A U.S. factory run by Envision AESC Group: Lithium is essential for the batteries in today's EVs. (Photo courtesy of Envision AESC Group)

Copper, used widely in wire harnesses and motors, is up by half, based on London-traded futures. EVs require two to three times as much copper as is used in gasoline cars. 

EV inputs are not the only materials going up in price. Rhodium, used in catalytic converters to scrub tailpipe exhaust, is now 30 times as expensive as five years ago. Steel for autos has also become costlier owing to higher iron ore prices.

All of this puts a dent in automakers' earnings. Toyota, Japan's top automaker, expects a 440 billion yen hit to operating profit, or 18% of its forecast. Honda sees a 250 billion yen impact, or 38% of its operating profit guidance.

Nissan Motor, Subaru Corp., Mazda Motor and Mitsubishi Motors face blows ranging from 37.4 billion yen to 100 billion yen.

This pressure on automakers' earnings is not confined to Japan. General Motors expects an annual cost increase of several billion dollars linked to higher materials prices. The average materials cost for a gasoline auto made in the U.S. came to $3,600 in May, double the year-earlier level, according to consulting firm AlixPartners.

With automakers planning to ramp up output of electrics, the EV market is expected to reach 23 million vehicles in 2030, 10 times its size in 2020. Analysts say this pace of growth could keep prices of lithium and other battery materials elevated.

Materials inflation bites beyond the auto industry. Japan's Daikin Industries, one of the world's top air conditioner makers, forecasts a 53.5 billion yen cost increase this fiscal year on the back of higher copper prices. Panasonic sees materials costs shaving 50 billion yen from its profit.

Coping with this pressure will test companies' efforts both in research and development and on the supply chain front. Nissan, Tesla and others are developing powerful batteries that do not require cobalt. The Toyota group and Volkswagen are each moving to lock in rights to lithium mine output. Panasonic has joined a project led by U.S. oil services company Schlumberger that seeks to extract lithium from underground salt water in a fraction of the time.

Passing along higher costs to car buyers is a harder option, industry voices say.

"It's difficult to raise [vehicle] prices" while remaining competitive, said an auto industry executive who asked not to be named.

[EvenSteven27]

That being said, I am lowering my expectations from $18 to a new target range of $12-15. I find the $6-7 range people bantering around far too low to even be considered. If it were that low, and I were the WRN board, I would walk out on Rio and get or wait for a new partner. 

[Heywood_Silvers]

Steven, while I fully agee that the raw inputs for the green energy & EVs will drive the base metals (copper in WRN's instance), the real boost to ultimate value will occur once the monetary system resets in the people's favour and not the central banks' favour. Have you any idea just how valuable an asset Casino will be once we are under a new monetary regime of a gold-backed

[Sooner]

In the most recent Crux interview, Paul stated that he thinks most shareholders would be happy with a 100% return. Back at that time I believe market cap was $400M so his opinion is most of us would be happy with $800M or around $5 usd per share I believe.  Perhaps those on this board are generally outliers from the rest of investors in terms of expectations and what average investor in WRN

[Heywood_Silvers]

Sooner, you are basing a return at a buyout using a historical market cap.  Market caps are based upon trading values.  Trading values are what shares trade for at the margin, dominated by flippers and short term momentum traders.  Totally irrelevant to intrinsic value. Let's say you invest in rare automobiles.  You buy one 10 years ago for $100k, but the intrinsic value

[Sooner]

I have plenty of patience...and holding until the end.  paul stated his opinion is investors would be happy with 100% return....Sooner never said that 

[GardenManman]

Sixner, haha

[EvenSteven27]

I agree with Heywood on this one. There is intrinsic value which fluctuates over time. What Paul stated in that interview is already dated. Still, Paul, should be more clear in articulated himself. He's an intelligent man but does not always put on the best live shows. Could be a case of stage fright or cracking under pressure.

[jsladek]

That's a real understatement.  "Perhaps those on this board are generally outliers from the rest of investors"