Kutcho Copper Corp.
TSXV: KC, OTCQX: KCCFF
US infrastructure deal raises expectations of increased demand for metals in the coming years. Three-month copper on the London Metal Exchange advanced 0.4% to $9,459 a tonne by 0718 GMT, while the most-traded August copper contract on the Shanghai Futures Exchange closed down 0.5% to 68,700 yuan ($10,644.73) a tonne.
Suppliers and steelmakers’ stocks surged after the announcement.
US President Joe Biden embraced a bipartisan Senate deal to spend hundreds of billions of dollars on infrastructure projects, building roads, bridges and highways in an expanded effort to stimulate the American economy.
“A group of senators – five Democrats and five Republicans – has come together and forged an infrastructure agreement that will create millions of American jobs.”
Glencore, one of the world’s largest copper producers expects copper supply demand to double by 2050.
“Today, the world consumes 30 million tonnes of copper per year and by the year 2050, following this trajectory, we’ve got to produce 60 million tonnes of copper per year,” said Glencore Chief Executive Ivan Glasenberg. “If you look at the historical past 10 years, we’ve only added 500,000 tonnes per year … Do we have the projects? I don’t think so. I think it will be extremely difficult.”
Copper’s integral role in electric vehicle technology
Electric vehicles (EVs) are here to stay. They will become an increasingly vital mode of transportation in our society as governments implement clean energy policies. As EVs rise in popularity, so too will copper demand.
The amount of copper that goes into an electric vehicle is staggering. According to the Copper Development Association, battery electric vehicles (BEVs) contain 183 pounds of copper while conventional cars contain, on average, 34 pounds of copper.
Even more copper will be required to charge EVs. Since each EV charger can require up to 8kg of copper, charging-related requirements alone could add up to an additional 216,000 tonnes of copper demand by 2027.
The EV market will clearly have a dramatic impact on copper demand. Consulting firm Wood Mackenzie estimates that passenger EVs will consume more than 3.7 million tonnes of copper annually by 2040. To put this into perspective, total worldwide copper usage for all purposes combined was 24.4 million tonnes in 2019.
From electrification to the proliferation of electric vehicles worldwide, the conductive metal will be in increasingly high government and private sector demand for many years to come. And as copper prices rise amid a limited supply of high-quality sources, copper mining companies appear to be in the driver’s seat for a long growth ride.
Commodity price disparity
The rise of copper prices has sent shares of mining companies soaring and investors are now positioning for the next leg up through junior resource companies which have been underfunded for the last decade and overlooked. In the current market look for the price disparity between copper projects which were valued below $3/lb Cu and now present a significant upside at $4/lb Cu.
That’s the opportunity emerging in micro-cap Kutcho Copper (TSX-V: KC)(OTC: KCCFF) with a market cap of US $58M (CA $70M). This new pricing criteria identified Kutcho based on a prefeasibility study in 2017 which demonstrated positive economics at a base case of $2.75/lb Cu and an NPV (8% Discount – After Tax) $265 million. At the time, a high case scenario of $3.00lb/Cu increased the NPV (8%) to $316 million (*Source: https://kutcho.ca/wp-content/uploads/2021/02/Kutch-2017-Project-Feasibility-Study_2017-12-08.pdf). Momentum in this stock is building ahead of a near term potential rerating from a higher-level economic study which increases detail and accuracy to form the basis of a project’s capital estimates. Kutcho is on the verge of publishing this Feasibility Study on its high-grade copper-dominant project in British Columbia Canada. This is a major catalyst for an advanced project under development and presents leverage with the price disparity from 2017 to the current spot price of copper which is trading between $3.50 to $4.50 per pound the last 6 months.
One thing is for certain: the net present value (NPV) is many times what the stock is currently trading for.
Securities Disclosure: Author owns shares of Kutcho Copper at the time of publishing and may choose to buy or sell at any time without notice. Author has been compensated for marketing services by Kutcho Copper Corp.
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Always thoroughly do your own due diligence and talk to a licensed investment adviser prior to making any investment decisions. Junior resource companies can easily lose 100% of their value so read company profiles on www.SEDAR.com for important risk disclosures.