April 26th, 2023 | 08:40 CEST
Copper is becoming more and more interesting: Mercedes-Benz, Orestone Mining, Plug Power
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"[...] We knew the world was rapidly electrifying and urbanising and needing significant amounts of copper to do so. [...]" Nick Mather, CEO, SolGold PLC
Copper: Tailwind from several sectors
Above all, the green revolution is making copper more in demand than it has been for a long time: whether it is wind, solar energy, or even electromobility - copper always plays a decisive role. Most cables are still made of the metal with the striking colour. Between 2021 and 2027, the annual demand for copper is expected to increase from 25.3 million tonnes to 30 million tonnes per year. Already today, everything on the copper market is on edge. Inventories are usually only sufficient for a few days; then, supplies are needed. Although there are numerous copper mines worldwide, their reserves are gradually running out and have to be replaced. Even major banks like Goldman Sachs are now optimistic about the copper price.
Orestone Mining: Worth a gamble thanks to its small market capitalization?
The Canadian company Orestone Mining combines deposits of copper, gold and silver. Its Captain gold copper Property is located about 40 km north of Fort St. James in British Columbia. To date, property owners have put CAD 5.4 million into the project and drilled 8,000 metres. Using a combination of magnetic techniques, the Company has identified a target zone that gets wider the deeper it is drilled. At 300 metres depth, the target zone reaches dimensions of around 350 metres by 1,200 metres. At a depth of 700 metres, it is already about 500 by 1,500 metres. Samples from the target zone have returned grades of 1.89 g/t gold, 11 g/t silver and 0.23% copper. Orestone Mining's goal now is to confirm and expand the discovered anomaly.
If the drilling is successful, the Company, valued at only around CAD 2 million, could also gain momentum on the stock market. The Company sees itself as undervalued and is therefore stirring the advertising drum. Given the low valuation and the clear objective, the Orestone Mining share could be an interesting portfolio addition for speculatively oriented investors. Although the downside risk is low at the current valuation, investors should first analyze the value themselves and look for an entry in the share with caution and in tranches.
Mercedes-Benz and Plug Power: It's complicated
The current situation on the commodity market shows that micro-caps like the Orestone Mining share can be successful. The price of copper was able to rise during the second half of 2022 and is now no longer hinting at a recession. Since the economy in China is humming again, copper could even tackle the old record prices at the 5-dollar mark again. In addition to demand from the metal-processing industry and carmakers such as Mercedes-Benz, copper also plays a role in regenerative technologies and hydrogen. The latter sector even places higher demands on the metals and alloys used because hydrogen can cause increased wear.
While rising prices for raw materials such as copper put pressure on the margins of industrial companies, the probability increases for small companies such as Orestone Mining that their projects will ultimately go into production - assuming exploration successes. If one compares such micro-caps with industrial companies such as Mercedes-Benz and Plug Power, the differences are obvious. While Mercedes-Benz, for example, is currently concerned with remaining competitive and keeping up in competitive markets such as China, the small resource explorer from Canada is initially focused on the next drilling results. The situation is also complex for hydrogen pioneer Plug Power, which has been striving to break even for more than 25 years. Now that the breakthrough has not been achieved, even shareholders are threatening legal action.
There are no such "side issues" with Orestone Mining. However, if drilling programs fail to yield the expected results, an investment in the share may still be risky despite its currently low valuation. If, on the other hand, the activities are successful, the favourable environment for copper and precious metals could further boost the share.
Conflict of interest
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