VIDEO: Copperbank CEO Gianni Kovacevic on the Future of Copper

James West

CopperBank Resources Corp. (CNSX:CBK) (OTCMKTS:CPPKF) (FRA:9CP) currently has three active copper projects in Alaska and Nevada. With the industry seeing over 50% performance in the last year, CEO Gianni Kovacevic says there’s a shift in interest from investors. But to fully understand the copper market, there are a few things you need to know.

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James West:     Gianni, thanks for joining me again.

Gianni Kovacevic:     Nice to be back.

James West:     Gianni, you put out a screaming hole on CopperBank. Tell us about that!

Gianni Kovacevic:     Yeah, we decided earlier in 2017 that it’s time to enhance the portfolio of CopperBank’s projects. If you recall, we purchased some copper projects back in 2014 and we were warehousing them for normalized copper markets.

James West:     Banking.

Gianni Kovacevic:     Banking them, exactly. Earlier this year and the end of 2016, a few things happened. One, the copper price moved – violently, in fact, in November, and now it’s sort of trading in the low $3.00 range. Other people were drilling with success, their share prices were reacting. If you can produce good drill results, it would seem there’s investor appetite for this kind of project. So that’s why we decided back in April/May, self-financed, and we had two rigs working at Pyramid all summer, now we’re starting to put drill results out. We’ve got nine more holes coming, and we put out on October 23rd, hole 33, 300 metres of 0.53 percent copper, with a very nice 40 metre portion at 1.17 percent copper. We’re elated.

James West:     No, nothing wrong with that. Okay, so collectively now, the entire portfolio of projects, you’ve decided to focus primarily on Pyramid? Or are there other ones that are getting the same amount of attention?

Gianni Kovacevic:     Yeah, we have three projects. So last year I put out a press release saying ‘how do I enhance the value of a portfolio like this?’ We’ve seen other companies where they take a project and create shareholder value by having a spinout and have that project operate as a business, as a share dividend for their shareholders. So we are looking at all three projects. We have Pyramid, which we drilled 3,690 metres this summer; we have a project adjacent to Pyramid called San Diego Bay, where we did a comprehensive field program; we’ll have a first 43-101 technical report work program for that project. And we’re doing over the winter a really sophisticated structural survey over the whole package.

And our Nevada project, we’re going to be doing some cost-effective enhancements to the pre-feasibility study that was released in September of 2013.

James West:     Hmm, that’s fantastic. So do you think that there’s been a sort of shift in the attitude towards copper mining and copper explorers at this point?

Gianni Kovacevic:     Yeah, I think there’s investor appetite. I do a lot of traveling, I speak at a lot of shows, I do keynotes at various conferences, and I was invited by the Financial Times of London to speak at their Asia Commodities Summit in Singapore. So just recently, they put out a story on palladium as the hottest commodity this year. I immediately sent an email to my friends at the Financial Times: I said hey, guys, look at copper if you superimpose it to the price of lithium. The graphs are identical; more importantly, it’s had over 50 percent performance in the last 12 months…copper! Palladium gets the front page, but you know, copper is going to have to start being appreciated, I think, a little more by investors. So we’ll see what happens.

James West:     Okay. So is that what’s happening, is what’s driving lithium driving renewed interest in copper? Is it the EV story?

Gianni Kovacevic:     It should. To really understand the copper markets, you have to appreciate electricity. I’m talking about energy – all of it. So if you understand that transportation is becoming electrified, okay great, and there’s a role for that in energy storage, but the way you utilize that energy in a car, the way you make energy for the car or for the battery, or the way you transport it – all that, every dynamic when we create transfer and utilize energy, the greener and cleaner, the more that is demanded of copper by a power of magnitude.

So I always tell people that it’s within the portfolio, copper should have been the marathon. It’s present throughout the energy mix. And as we de-carbonize this energy mix, the more is going to be demanded of copper.

James West:     Sure. Okay. So why do you think it is that copper has fallen out of favour over the last five years in terms of money coming into the exploration sector, when we’re coming up against this declining curve of supply versus rising curve of demand?

Gianni Kovacevic:     My friend Dennis Gartman uses a great quote and he says, ‘when they raid the house of ill repute, they arrest everyone, including the piano player’.

James West:     That’s good.

Gianni Kovacevic:     Commodities are dominated by oil and gold, by far. Even now at $50 oil, it’s a $1.7 trillion market. Copper is a $100 billion market.

If you look at a graph of oil and copper over the past 40 years, 90 percent of the time, they’re correlated. I was on Bloomberg in March of 2016; I said because copper comes from very few mines and oil comes from 4,700,000 individual wells, the very thing that makes it possible to go away from oil is copper. This has to buckle. There has been a 50 percent differential now because copper has de-coupled from oil. If you look at a price of copper with gold for the past year, 50 percent differential; where are we going in the future?

The first question is, do we need more copper to make all this electrification energy possible? The answer is yes. Where is it going to come from? The only way we can make deposits that are un-economic, economic, is one factor: a higher copper price. And so if oil can be in the doldrums depending on certain factors, it cannot follow that old rulebook anymore. The only way we’re going to have these projects financeable is to have copper prices – oh and by the way, it takes seven, eight, ten years to make a copper mine; it’s different with other things – a very, very long process.

James West:     So then, is the dichotomy in oil prices versus copper prices a permanent feature now of the evolutionary curve of energy, based on the fact that EVs are in fact disintermediating on the future timeline, the viability of hydrocarbon vehicles?

Gianni Kovacevic:     Yeah, the old rulebook is going to, I think it doesn’t apply anymore, so the answer is yes. I think that when it becomes a Page One story, it is going to be really the line item that investors are going to start focusing on.

James West:     Sure. So the time to buy a Page One story is not the day that it’s on Page One, is it? It’s now!

Gianni Kovacevic:     Yeah. Let’s use another saying: What is successful investing? And I’m quoting a famous investor. Successful investing is having people agree with you later. I like to allocate capital to things that are, you know, Page One is the efficient market; I want to invest in stories on Page 16 that are heading to Page One.

Lithium and cobalt, I like them, they’re interesting, you know, I think they’ve had a lot of attention and a big run-up, and they’re certainly not cheap anymore, albeit I do participate, and I think it’s where investors should have brainpower.

James West:     Sure.

Gianni Kovacevic:     But then correlate that to the market cap of other copper companies. If you just look at what CopperBank, what our portfolio is, the potential that we have within the portfolio, and our current market cap, which is $25 million.

James West:     Sure. Do you think that the rate at which copper demand is increasing is going to be able to be met by the rate at which copper discoveries are proceeding?

Gianni Kovacevic:     McKinsey Consulting did a comprehensive report on commodities, and they looked at the Big Five: Oil, coal, iron ore, natural gas and copper. And they came to the conclusion that all of these things start to lose new demand – except copper. They see it in their figures that we’re going to need 45 to 50 percent more copper in the next 15 to 20 years if all this electrification, or as you call it, green energy, actually is plausible.

By the way, when you make things more efficient on a petroleum engine, you use less oil. When you make an electrical motor more efficient, you use more copper, right? So where is it going to come from?

James West:     Right.

Gianni Kovacevic:     The profile is very scarce. I don’t see any scenario where, if we truly need 50 percent more copper demand, it’s going to be very challenging, I think, for the copper industry in general, to be able to fill that. We’re talking about 10 or 12 million tonnes of copper; it doesn’t exist.

James West:     Right.

Gianni Kovacevic:     So aluminum is also going to play a role within the future of electrification.

James West:     Sure. Okay, well that’s great! Thanks for the update, Gianni. We’ll come back to you in a couple of quarters’ time and see how you’re making out. Thank you for joining us today.

Gianni Kovacevic:     Thank you. Stay warm.

James West:     Yes!

James West

James West

Editor and Publisher

James West founded Midas Letter in 2008 and has since been covering the best of Canadian and US small cap companies. He covers global economics, monetary policy, geopolitical evolution, political corruption, commodities, cannabis and cryptocurrencies. As an active market participant, James is not a journalist and is invariably discussing markets...
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