Crown Mining Corp (CVE:CWM) (OTCMKTS:CWMZF) (FRA:C73) CEO Stephen Dunn shares his thoughts on the undervalued mining sector and its impact on the company’s stock price. Dunn explains that for the last 6 to 12 months, there has been a copper deficit as the world consumes more copper than it produces for items such as batteries. Unfortunately, with poor prices in the precious metal sector, new projects are not occurring as the industry needs to hit at least $3.50 to justify building new copper mines. There is no short-term solution to the copper deficit as mines take 5 to 7 years to build. Crown Mining owns a historic copper mine in northeast California with at least 2 billion pounds of copper and will be ready to begin production once prices increase.
Ed Milewski: We’ve got Steve Dunn back, CEO of Crown Mining. Of course, we have Brendan Caldwell with us, who’s a follow the money gentleman. So Steve, mining stocks are shit right now, let’s face it, right?
Stephen Dunn: That’s pretty fair.
Ed Milewski: You’re out of favour.
Brendan Caldwell: In the toilet.
Ed Milewski: Yeah. You’ve got a big asset in California, you own some of the land – any updates?
Stephen Dunn: Any updates? Well, last thing we did was, we came out with a PEA in February.
Ed Milewski: So this is a big, historic deposit?
Stephen Dunn: Yes. There’s 2 billion pounds of copper in a 43-101, and when Plaster was working on the property in the 60s, they thought there was 4 billion pounds. And the interesting thing is, back then, they were only dealing, they were only looking for deposits that were perhaps 200, 300 metres deep. So most of our property, most of the deposit that we have, is actually open at depth, and it’s open on strike. So, there’s a lot more copper there.
Ed Milewski: There’s a lot of copper.
Stephen Dunn: Yeah. More than Plaster thought, more than what we have in our 43-101.
Ed Milewski: How many – the ticker, by the way, is CWM.
Stephen Dunn: Yes.
Ed Milewski: 40 million shares, roughly?
Stephen Dunn: Yes.
Ed Milewski: And stock’s trading $0.08, $0.09. So let’s say $0.10, it’s capped at $4 million.
Stephen Dunn: That’s right, that’s right.
Ed Milewski: Which is a fraction of the value.
Stephen Dunn: Well, the way effective is, in the last copper cycle, which was 2006 to 2012, copper companies were being taken over at approximately $0.10 per pound of copper. So we have 2 billion pounds of copper, times $0.10, $200 million.
Ed Milewski: And right now your cap is four.
Stephen Dunn: Our market cap is 4 million, and we’re not the only one; every single company in this space has no –
Ed Milewski: You don’t have special copper, there, you just have copper.
Stephen Dunn: We have copper, and you know, we need higher prices to get people interested, but the entire sector is undervalued. The entire sector, nobody’s interested in it. All the producers right now are making a lot of money; Freeport came out today, their cash flow in the first nine months of this year is $4 billion, their market cap is $16 billion. And this is with copper at $2.80.
Ed Milewski: So they had cash flow?
Stephen Dunn: Cash flow of $4 billion in the first nine months.
Ed Milewski: So it’s trading at 4 times cash flow?
Stephen Dunn: Right. Copper Mountain, I’ve talked to you about that before – they have cash flow approximately $100 million a year, their market cap is 200 million. Like, it just makes no sense. One of these days, people will see there’s value here.
Ed Milewski: Right. And unlike gold, which is a bit of a currency and a hedge, copper is needed for growth.
Stephen Dunn: We can’t live without it. Everything –
Brendan Caldwell: So many things.
Stephen Dunn: It’s behind electricity, and electricity is how we get by. It’s how we move around. it’s how light gets delivered into the office building. It’s where our heat comes from.
Ed Milewski: And the electrification of the world is continuing faster and faster.
Stephen Dunn: that’s right. Electricity demand basically comes from two things: population growth and urbanization. And there’s no stopping that. Like, the people in India, the people in China, they want what we have. There’s no stopping demand for copper.
Brendan Caldwell: Yeah, I remember a few years ago as well, reading about that we were going into a shortage of copper; a severe one, and they were saying, I think it was by 2018 or ’19, it was going to begin; by 2020 it was going to be bad. Huge.
Stephen Dunn: We’re already there. We’re already in a deficit; we have been in a deficit, I think, for the past six, nine, twelve months.
Ed Milewski: So for the viewers, that means that they’re producing less than is being consumed?
Stephen Dunn: That’s right.
Ed Milewski: Every year.
Stephen Dunn: That’s right. And what’s making up for it right now is the inventory levels that were out there. So the inventory is basically making up the shortfall, but that can only go on for so long. And you’ve also got a huge – there’s a huge player in the market space right now, and that’s China. Like, they basically buy half of all the copper that’s consumed. Now, if you think about, you know, copper on a big macro level, there’s approximately 20 million tonnes produced; there’s 25 million that’s actually consumed, and the difference is scrap.
But if you look at that 25 million tonnes times approximately $3.00 a pound, that’s $150 billion space. So it’s in China’s interest to keep prices as low as they can. Like, if they can drive prices down by 10 percent, which is what they just did, they save themselves $7 billion.
But in the long run, they’re going to put themselves in the corner, because nobody’s going to build any new copper mines with copper prices at $2.80. Like, we need basically $3.50.
Brendan Caldwell: So $3.5 is a historical average –
Stephen Dunn: No, that’s basically, when you take a look at all the copper deposits that are out there, on average, they need $3.50 to justify the spend.
Brendan Caldwell: Gotcha.
Stephen Dunn: Because it costs a lot of money to build these things. So we’re looking, basically Crown and any of these other juniors, is an option on copper; if you think demand for copper in the future is going to continue, and if you think the supply side is going to continue to roll over, then you’ll think prices need to go up. So you know, a good way to get some exposure to copper is some of these junior companies, and Crown is one of them.
Ed Milewski: Yeah. Robert Friedland, who’s legendary and has found some very big deposits worldwide, I think he’s quoted as saying that, you know, as time goes on, copper won’t be quoted in pounds, it’ll be quoted in ounces, because you know – I mean, anything can happen. Anything can happen.
Stephen Dunn: Well, there’s crazy forecasts out there right now. Like, this cycle, there are people like Friedman who are calling for numbers like $6.00, $7.00 a pound, and can you imagine how much these mining companies are going to be making if copper prices go there? Like, just take a look at Freeport. They came on today, they produce 4 billion pounds of copper a year, have cash flow of 4 billion in the first nine months. Copper goes up a dollar, like, there’s another $4 billion in cash flow. And here’s the interesting thing: nobody can just go build a mine in a year. Like, it takes five, six, seven years to get a mine permitted and then built.
Ed Milewski: Right.
Stephen Dunn: So there’s no short-term solution here.
Brendan Caldwell: Yeah, and that’s what I remember hearing, actually, a few years ago when we were looking at from an economic standpoint – you’ve got a shortage that’s just looming; we already knew it. But because of prices being down, nobody was really going out there to create these mines that do take years, especially if it’s starting from scratch.
And now we’re having it where we’re having a supply crunch – anybody who has any idea of economics understands, if your supply’s not there and the demand starts rising, which it will, with all these electric cars, with electric houses, whatever it be – that’s when you have to start realizing that prices are going to….
If you’re able to, there’s two people and I only have enough for one, I’m going to see how much I can charge for it, and I don’t care who wins. Like, that’s what all businesses are asking themselves.
Ed Milewski: That’s right, that’s right.
Stephen Dunn: If you take a look at the power points of all the major mining companies, like Rio Tinto, BHP, they all talk about how the future for copper is so rosy. They all want to be there, and they’re looking around the globe trying to find new copper deposits, but there aren’t a lot of them.
Ed Milewski: And the grades of the deposits are a lot lower today than they were 10, 20, 30 years – I mean, the low hanging fruit gets picked.
Stephen Dunn: Gets picked off, that’s right. Escondida, which is the largest mine – largest producing mine, I’m pretty sure, its grade, when they started mining there I think 35 years ago, was 1.45 percent. They’re now mining down around 0.6, 0.65. So it’s, you know, they’re going deeper and deeper; they’re not getting –
Ed Milewski: It’s in Chile?
Stephen Dunn: Yeah, it’s in Chile. They’re not getting the same grades, so they’re having to move twice as much ore to get the same amount of copper. But they’re getting deeper and deeper, so it gets more expensive to dig the rock out. Like, it’s, we’ve got a looming problem here, in the copper space. And if your positioned, you’re going to make some good money. I don’t know when it’s going to happen; I thought it was going to be this year.
Ed Milewski: Yeah, no, I – last week, we saw a day where there was 1,200,000 shares of Crown trade, and if you go back and look at a 10-year chart, that was the biggest trading day in volume in 10 years. 1,200,000. There’s not that much stock; there’s only 40 million shares, and 70 percent of it’s probably tied up in pretty friendly hands.
Stephen Dunn: 40 million, yeah. That’s right. Like, I have 20 percent; I’ve got a few friends that each have almost 10 percent. So it’s pretty tight.
Ed Milewski: This is a way of playing copper futures without the risk, right?
Stephen Dunn: Yeah. You’re not going to get a margin call; it’s not going to expire on you.
Brendan Caldwell: And whereabouts, am I missing the beginning – whereabouts is the mine?
Stephen Dunn: The property itself is approximately 90 miles drive from Reno, and we’re northwest. So we’re in California, but we’re very close to the Nevada border.
Ed Milewski: Northwest of Reno, northeast California.
Stephen Dunn: That’s right.
Brendan Caldwell: Gotcha.
Stephen Dunn: And it’s mountainous, and it’s very, very rural. Where we are, there’s nobody around. and it’s like I said, it’s two old mines; they were mining this back in the 1915 to 1930 period, and they were actually mining back then, they were taking copper out, the grade was averaging around 2 percent, and they left anything that was not 2 percent, behind. So that’s what we have.
Brendan Caldwell: It’s probably way easier now to mine it, I can imagine, as well. Look what we’ve done in the last 100 years. That’s economical, now.
Stephen Dunn: Back in those days, they got there by horse, and eventually they put a railway in there. But I can’t imagine how hard it would have been, the life, to be a miner back in those days, to be a prospector, to be a miner…you know, they had dynamite and stuff like that, but you know, they used horses to get a lot of things out. And then finally the rails came in. But all that infrastructure is still there. We’ve got a paved highway that goes right up to within 100 yards of our add-it.
Ed Milewski: Right.
Stephen Dunn: And we’ve got electricity there, we’ve got running water.
Ed Milewski: So if you said, based on the how many holes did Plaster drill there? 400, 500?
Stephen Dunn: Plaster drilled, yeah, there was over 400 holes back in the 60s.
Ed Milewski: And to drill it properly, you could drill another 1,000 holes, couldn’t you?
Stephen Dunn: You know what? If a major took a look at this property, they would probably drill another 200 to 300, because what they would want to do is just further define how much was there, where the extensions were, and do drilling which is necessary for the actual mine design. But we already know we’ve got a couple billion pounds, and a little bit more drilling, we could increase that, but we don’t need to. It’s, you know, the resource is there.
Ed Milewski: So you know, if you’re buying a marijuana stock, you might say you’re buying a growth story, a momentum play; if you’re buying Crown, you’re buying value, but we don’t know when. You don’t know when, and it’s –
Stephen Dunn: You have to be patient.
Ed Milewski: We’re not saying, buy it today.
Stephen Dunn: You have to be patient.
Ed Milewski: I started buying it a year ago. Do I wish I waited? Sometimes, but I feel like it’s going to happen. I feel like the electrification of the world is going to continue.
Brendan Caldwell: Most likely.
Ed Milewski: Well, you know, you wonder, like, you never know what’s coming around the corner; there’s some funny things going on in the world. But most of the auto-makers have said, you know, we’re going electric. It’s four times the amount of copper –
Stephen Dunn: In an electric car. But the other things, which is huge, which I think a lot of people miss, is when they build a megawatt of power using wind or solar, they’re using more copper to actually deliver that megawatt of power. Like, they’re using four to five times as much copper to actually deliver it. And then here’s the other neat thing: Battery storage is going to become huge in the future. Because the only way wind really makes sense, you know, and I think most of the engineers are going to admit this, but the only way wind makes sense is if you can store it. Because most of the time, wind power is produced when you don’t need it.
Brendan Caldwell: It’s a global adjustment phase.
Ed Milewski: Is that Kathleen Wynne, making sense? Or wind, I’m sorry, sorry, I got that mixed up.
Brendan Caldwell: There’s a reason why they had seven seats after. But anyway…
Stephen Dunn: Yeah, that’s right. And battery storage is hugely copper-intensive, because just think about it: you’ve got it, you’ve got to have all these copper wires sending the electricity to whatever battery formula you’re going to use, and then get it back to the grid. So it’s hugely copper-intensive. So there’s so many new avenues, there’s so many different sources of demand for copper in the renewable, sustainable energy model. And I’ll tell you, you cannot stop this demand for electricity; you cannot stop it. The whole world wants what we have.
Ed Milewski: Yeah, yeah, for sure. Steve, we’re going to have to wrap it up now, but thanks again for coming on at short notice.
Stephen Dunn: Thank you.
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