February 11th, 2021 | 12:32 CET
Kodiak Copper, Freeport-McMoRan, Millennial Lithium: The copper rally continues!
Table of contents:
"[...] If we pursue our goals conscientiously, the market will adjust its valuation accordingly, I am sure. Often, all it takes is a trigger. [...]" Ryan McDermott, CEO, Phoenix Copper
Born in Munich, he first studied economics and graduated in business administration at the Ludwig-Maximilians-University in 1995. As he was involved with the stock market at a very early stage, he now has more than 30 years of experience in the capital markets.
Kodiak Copper - copper supply in the making
When you consider that the global supply of copper is currently managed from about 10 major mines and 20 far smaller ones, it becomes clear that a medium-term supply of the coveted raw material can only come from new developments. An e-vehicle requires 4 times the amount of copper used in a conventional vehicle, and around 70% of the world's copper is used in electronic applications. Global demand will be about 1.6 million metric tons (MT) in 2025, compared to 0.6 million MT in 2020, representing a 160% increase in demand in 5 years - that's exponential!
The MPD project of Canadian explorer Kodiak Copper, an exciting player from British Columbia, stands out. The 100% owned project, which includes the recently discovered Gate Zone, is close to well-known mines such as Copper Mountain, Highland Valley, and New Afton. Public access has been completed for years with infrastructure that inspires. A copper major can start shipping directly after investing in the production facility. Of course, we are talking about investments in the range of several USD 100 million.
The Kodiak Copper portfolio is complemented by a property in Arizona, located in a very mine-friendly environment. The porphyry drilling in British Columbia went quite to management's liking. The good results also prompted Teck Resources to acquire a stake of just under 10% for a total of CAD 8 million. With a full treasury of more than CAD 14 million, the Company can now move forward in 2021, with plans for more than 30,000 meters of further testing and assaying.
Kodiak Copper shares have been trending sideways at the CAD 1.50 line for several weeks; presumably, the market is waiting for fresh news. We expect news soon, and with the successful setup, it shouldn't be bad. To buy - as long as the potential is not yet open in front of us, with new drilling results, the CAD 2.00 should be approached.
Freeport-McMoRan - Copper is the new gold
One of the copper standard stocks is Freeport-McMoRan, a commodity stock from Phoenix. The stock has had a great run, with a 5-year return of a whopping 398%. Due to strong copper prices, Freeport-McMoRan was able to reduce almost all of its debt. The dividend was just reinstated; it is now USD 0.075 per quarter, which is a 50% increase over the dividend before it was discontinued last year. With expected growth over the next few years, the quarterly dividend could return to USD 0.25, which was the payout before the oil market collapse that nearly bankrupted Freeport-McMoRan.
Freeport-McMoRan's projected EBITDA of USD 11 billion for 2021, assuming stable copper prices, could be even greater if demand increases. This high cash flow will allow the Company to deploy funds for further mine developments to cope with rising demand. The London Metal Exchange complains about physical inventories being too low if the forward price continues to go through the roof.
At the current entry point, Freeport-McMoRan stock certainly looks to have done very well already, and overall we fundamentally estimate growth of about 10% per annum (CAGR) over the next 5 years. However, as the economy is likely to pick up another gear after the pandemic, an investment makes long-term sense after a minor correction in the chart.
Millennial Lithium - Lithium remains one of the Metals for 2021
The entire lithium stock sector has moved up tremendously in recent months. Since Elon Musk's Battery Day in September 2020, there has been no stopping white gold stocks. The share of Millennial Lithium even reached a new 11-year high of EUR 3.24 in January. Many other lithium stocks also knew almost only one way recently: up. The lithium price recently climbed to USD 65,000 and is thus as high as it was last in mid-2019.
The demand for lithium will remain high because investments in e-mobility will accelerate again under Biden's government. At least, that's what a comparative study published in the journal Nature Energy on the series production of lithium-ion batteries and alternative technologies by a team of battery researchers led by WWU Münster suggests. What has been buried in drawers for years is now coming to light. The oil lobby blocked battery cell production for long periods, and now the oil multinationals are even investing in battery metals themselves - the signs of the times are tangible. They are urging us to throw old habits overboard. Relying permanently on increasing oil sales volumes has been a discontinued model for 3 years. Global demand is falling, currently only slightly, but it is falling!
If we look at the future demand for energy storage, it will undoubtedly take a few more years until enough Gigafactories are built to meet the future demand. For the year 2030, global production of rechargeable batteries will increase from today's 750 gigawatt-hours (GWh) per year to 1,500 GWh. Despite all the euphoria, lithium stocks remain a speculative investment. Orocobre and SQM are the best-known representatives, a smaller value but thus also a thoroughly promising player is Millennial Lithium. The market capitalization already reaches EUR 232 million - production on the 12,619sqm Pastos Grandes project is expected to start in 2 years. It is exciting to see where we will see the share then.
Conflict of interest
Pursuant to §85 of the German Securities Trading Act (WpHG), we point out that Apaton Finance GmbH as well as partners, authors or employees of Apaton Finance GmbH (hereinafter referred to as "Relevant Persons") may in the future hold shares or other financial instruments of the mentioned companies or will bet on rising or falling on rising or falling prices and therefore a conflict of interest may arise in the future. conflict of interest may arise in the future. The Relevant Persons reserve the shares or other financial instruments of the company at any time (hereinafter referred to as the company at any time (hereinafter referred to as a "Transaction"). "Transaction"). Transactions may under certain circumstances influence the respective price of the shares or other financial instruments of the of the Company.
Furthermore, Apaton Finance GmbH reserves the right to enter into future relationships with the company or with third parties in relation to reports on the company. with regard to reports on the company, which are published within the scope of the Apaton Finance GmbH as well as in the social media, on partner sites or in e-mails, on partner sites or in e-mails. The above references to existing conflicts of interest apply apply to all types and forms of publication used by Apaton Finance GmbH uses for publications on companies.
Apaton Finance GmbH offers editors, agencies and companies the opportunity to publish commentaries, interviews, summaries, news and etc. on news.financial. These contents serve information for readers and does not constitute a call to action or recommendations, neither explicitly nor implicitly. implicitly, they are to be understood as an assurance of possible price be understood. The contents do not replace individual professional investment advice and do not constitute an offer to sell the share(s) offer to sell the share(s) or other financial instrument(s) in question, nor is it an nor an invitation to buy or sell such.
The content is expressly not a financial analysis, but rather financial analysis, but rather journalistic or advertising texts. Readers or users who make investment decisions or carry out transactions on the basis decisions or transactions on the basis of the information provided here act completely at their own risk. There is no contractual relationship between between Apaton Finance GmbH and its readers or the users of its offers. users of its offers, as our information only refers to the company and not to the company, but not to the investment decision of the reader or user. or user.