In the past year, all anyone talked about has been silver & gold. Yet this year the copper (“Cu”) price is making a big move, albeit not as much as precious metals. Cu is +52% in the past year.
As I write this sentence, the COMEX near-month futures price is $6.57/lb., equal to $14,484/tonne. Today’s price is an ATH. Why is Cu soaring? Rising demand for real assets as geopolitical & trade uncertainties accelerate, and a sudden drop in the US$ exchange rate.
Long-term supply NEVER surprises to the upside, and near-term supply ONLY surprises to the down-side. For decades Cu consumption rose by +2.0-2.5%/yr. Then, a few years ago, data centers/AI & EVs changed the narrative to +3.0%/yr growth going forward.
Also needing immense & growing quantities of Cu are; consumer electronics, appliances, tools, drones, robots, new & refurbished electrical grids, plus renewable energy plants. Military demand is strong as Europe, China & the U.S. increase spending on high-tech warfare & munitions.
Today, many pundits are calling for +3%-4%/yr increases. It hardly matters whether it’s +2.5% or +4.0%, security of supply is the challenge. In S. America it takes 15-20 years to get a green field project into production, and 10-20 years in most other places.
Some major projects in S. America have seen off-and-on development for > 25 years! By contrast, hyper-scale data centers take 2-3 years to build, and renewable power plants 4-6 years.
Presumably these S. American giants will finally get going with today’s higher Cu price, but they’re still 3-8 years away!
Mined Cu deficits are unavoidable for years, possibly a decade to come. Only recycling and/or new mining technology can save the day, and it will to an extent, but it won’t stop the Cu price from settling at meaningfully higher levels.
How high? $15,000/t used to be the wild-eyed Cu-bull target, we’re just 7.5% from $15K… I think $18K-$20K/t will be the new bullish benchmark for 2027 or 2028. That’s $8-$9/lb. $16k/t seems easy to me, but what do I know?
Readers should note that at $8.50/lb., Cu would be up less than 100% from 12-18 months ago. Compare that (prospective) sub-100% gain to silver +283%, platinum +178%, Cobalt +161%…
Due to big problems such as Freeport McMoRan’s Grasberg mine in Indonesia, and a few others, producers are refocusing on safer jurisdictions. Among the top dozen Cu producing countries fully half are China, Russia, the DRC, Indonesia, Zambia & Kazakhstan.
The world urgently needs sustainable, long-term supply from safe, Western-friendly jurisdictions. As a result of the Trump Administration’s actions, both good & bad, the U.S. is currently one of the best places on earth to develop a mining project.
A company that’s very well positioned, and vastly undervalued in today’s environment is US Copper Corp. (TSX-v: USCU) / (OTCQX: USCUF). US Copper is advancing a sizable 3 billion (Indicated + Inferred) Cu Eq. project — a storied past-producer — in California, USA.
It has an estimated 23.1M ounces of silver (“Ag“) and a Cu grade of 0.30%. A subset of the project hosts higher grade.
For instance, at spot pricing, the Engels+ portion contains > 220M pounds at an attractive 0.52% Cu Eq. (0.52% is now US$74/t rock, a very solid level for bulk tonnage projects).
Note: 0.30% Cu is low compared to most S. American mines, but in B.C. Canada Teck Resources mines 0.25-0.28% Cu, Hudbay Minerals ~0.24%, and Taseko Mines ~0.23%. In Arizona, Freeport McMoRan operates at 0.20-0.35% Cu., and Rio Tinto is earning into a project in Nevada with a grade of 0.18% Cu Eq.!
US Copper’s 100%-owned, 6,056 acre Moonlight-Superior project is in NE California, ~100 miles NW of Reno, Nevada. The Company acquired the claims/patents covering the past-producing Superior & Engels mines out of bankruptcy in 2013.
In 2016, it optioned the Moonlight claims, then acquired the claims outright in 2018. Never in the past several decades has the time been better to advance a sizable Cu project in the U.S. (and in California).
It’s truly a perfect storm of bullish factors (as evidenced by today’s ATH Cu price!) that has opened a window to make very serious progress at Moonlight-Superior.
One of last year’s most talked about miners was REE producer MP Materials, with an active mine in California. It received significant investment & other support from the U.S. government, which led to an investment by Apple, sending MP’s valuation through the roof.
Next door in Nevada, Lithium Americas received a stamp of approval from the U.S. government and a cornerstone investment from General Motors.
Alaska’s Trilogy Metals is a third junior that received meaningful government backing, and so far this year REE hopeful USA Rare Earth has been chosen.
I’m not suggesting US Copper will be treated like MP, Lithium Americas, Trilogy, or USAR, but one should not rule it out! Even without headline-grabbing news, the regulatory backdrop is more favorable than ever in the U.S. and in California.
Cu is now deemed a critical material in many or most parts of the world. Early this year, US Copper announced a robust PEA using $4.15/lb. Cu, +36%! below the current $6.48/lb. At $4.15 the post-tax NPV(7%) is ~C$1.5B, and at $6.48/lb. it’s ~C$3.2B.
Compare that to the Company’s enterprise value {market cap + debt – cash} of just ~C$25M. (at $0.175/shr.).
That means US Copper is valued at an absurdly low, less than 1% of Moonlight-Superior’s post-tax NPV(7%) assuming US$6.48/lb. Cu {source: PEA sensitivities table, page #305).
The Company is valued as if there are serious red flags, but in my opinion the primary risk factors (funding, social license to operate & permitting) are routine.
I would rather be developing a mine in the U.S. than in Peru, Ecuador, Argentina, Columbia, Chile, Indonesia, China, Kazakhstan, or certain parts of Africa!
In the following table, 60% of 10 massive S. American projects are at 3,800+ meters, adding cost & logistical challenges. Nearly all are more remote (or far more remote) than US Copper’s NE California location near the Nevada border.
All are green field projects with no past mining activities. On average they’re 17 years old, yet only one has reached BFS stage. All will likely, or definitely, require seawater to be desalinated and then pumped up to 100+ km to site.
Even if readers believe US Copper’s prospects are more risky than I describe, the vast undervaluation makes up for it at an EV/Cu Eq. lb. ratio of ~C$0.008. Compare that to S. American projects at a median valuation of about C$0.04/lb. (5x higher than US Copper).
Make no mistake, Moonlight-Superior is far smaller than the S. American giants at ~3 billion Cu Eq. pounds, but it’s cheaply valued at an 80% discount to the C$0.04/lb. median.
Operating in the U.S. offers meaningful advantages. Total logistics costs (shipping, insurance, [port, storage fees], and demurrage charges) are 3–4x higher from S. America or Africa than transport from California to western U.S. smelters.
Sourcing domestically reduces shipping times from 4-5 weeks to 1-4 days, greatly enhancing security of supply. Although new infrastructure will be required, Moonlight-Superior is just seven miles from highway & rail, and two miles from power.
Management believes its resource could become twice as large if aggressively drilled. Work done by previous owners supports that contention, but that historical data is non-NI 43-101 compliant. Doubling the resource would take considerable time & money.
The PEA already shows attractive economics at $4.15/lb. Cu and extremely attractive metrics at $6.42/lb. At $6.42/lb., post-tax NPV jumps to over 40%! That’s a top quartile figure, even after adjusting peer economics to spot prices.
Upfront cap-ex for Moonlight-Superior is daunting relative to US Copper’s enterprise value. However, there are numerous free-money grants available, and more being added, from various U.S. gov’t agencies/departments.
With the outlook for Western-friendly sourced Cu so strong, significant debt funding by smelters and/or partially pre-paid off-take agreements are quite plausible. A few years ago, 60% project debt financing was the best case. Now, probably 70-80%.
Other sources of non-equity capital to fund construction could reasonably come from royalty/streaming companies. Or, a strategic partner like BHP, Rio Tinto, Freeport, Glencore, Grupo México, Southern Copper, Hudbay, Capstone Copper, Ivanhoe Electric, etc. could be obtained.
Japanese commodity traders Mitsui, Sumitomo & Mitsubishi are meaningfully invested in S. American Cu mines, and have interests in mines/projects in Arizona. Might they have interest in California?
Numerous U.S. gov’t free-money grant opportunities for critical materials…
US Copper (TSX-v: USCU) / (OTCQX: USCUF) is a high-risk junior miner, but no more so than most other high-quality, early-stage juniors. The Company’s valuation has room to improve quite substantially if/when the market recognizes its massive relative value discount.
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