May 13, 2021

US Copper Stock Ready to Join Impressive Rally

Midas Letter
Midas Letter
US Copper Stock Ready to Join Impressive Rally

The copper price is at all-time record highs. As Ed Milewski says “copper is hot!”. With that being said, there is a US Copper stock that looks ready to join in on the commodities impressive rally.

With the increasing demand and lack of supply for copper, analysts are predicting prices to appreciate a lot higher than the current record of $4.7785.

Although the copper price is at its all-time highest level, when adjusting for inflation the historical values show there is a lot more room for growth. Goldman Sachs showed the best relative price for copper was in the 1970s – being the equivalent of approximately $6 per pound.

With the complete lack of copper supply, the Bank of America analysts predict a major rebalancing in the market. They warn the copper price could surge as high as $9.07 per pound.

Historically, copper demand has grown at approximately 3% per year because of population growth and urbanization. But, with the global energy transition away from fossil fuels to sustainable energy production, and the necessity for copper to facilitate that change, the increased demand for copper is only going to grow.

So how does the copper price factor into copper junior mining stocks valuations?

A copper price of $3.50 per pound is widely accepted for major copper producers to justify the capital expenditure of building new mines in order to be profitable.

As the copper price has only been above $3.50 for around 6 months, junior mining stocks have yet to join the underlying asset price rally. But as these price levels sustain, we could be entering a period that would make it interesting for copper producers to purchase copper deposits.

US Copper Corp (CVE:USCU, OTCMKTS:USCUF) (formerly Crown Mining Corp) is proving the economics behind what a great deal it could be at current copper prices and beyond.

A 2018 Preliminary Economic Assessment (PEA) demonstrated positive economics at US$3 copper for the Moonlight deposit, which has a NI 43-101 indicated resource of 252 million tons at 0.25% copper and an inferred resource of 109 million tons at 0.24% copper. Specifically, the economics of the one deposit with a net present value (NPV) of 8% equates to US$376M after tax at $3.50/lb copper.

And that’s just one deposit.

The company has a seven-hole drill program planned this spring at its Superior and Engels deposits in California. The Superior deposit already has a NI 43-101 resource of 54 million tonnes at 0.41% copper, and the Engels deposit has an unconfirmed historical resource of 19 million tons at 0.63% copper sulfide at surface.

If the company can demonstrate these two deposits are high-grade starter pits, US Copper can further improve its entire copper project economics.

Watch the full interview to learn about US Coppers drilling activity, the company’s likelihood to be acquired by a copper producer, the rise in commodities, and the world’s shift to electric vehicles.

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