Analysts: Copper Co. in Good Position for Green Economy

Source: Streetwise Reports   02/02/2023

Both of World Copper Ltd.’s major projects put the company in a great place to take advantage of the coming boom in the “metal of electrification.”

World Copper Ltd. (WCU:TSX.V; WCUFF:OTCQB) is developing two major copper projects just as the demand for the red metal is about to kick into overdrive worldwide.

That both the Escalones project in Chile and the Zonia project in Arizona already have resource estimates puts the company in a good position to help fill that gap, analysts said.

“World Copper’s stock is benefitting from several catalysts,” wrote analyst Steve Ralston for Zacks Small-Cap Research on Dec. 8, 2022. “Currently, there is a positive macro tailwind for the copper mining industry, driven by the outlook for a looming supply shortage based on the confluence of increased demand from green electrification initiatives and an impending reduction of mine production.”

World Copper announced Jan. 25 it is selling 2 million common shares in the capital of Electric Royalties Ltd. (ELECF:OTCMKTS) to World Copper stakeholder Wealth Minerals Ltd. (WML:TSX.V; WMLLF:OTCQB) for CA$0.25 per share for a total of CA$500,000.

President and Chief Executive Officer Nolan Peterson said the company is monetizing the assets for ongoing expenses.

“Copper is a critical element used in the global economy that is becoming harder and harder to find and mine profitably,” Peterson told Streetwise Reports. “We have two assets that are relatively easy to put into production and that we think are poised to benefit from a rush of investment to come.”

Another analyst, Taylor Combaluzier of Red Cloud Securities, initiated coverage on the company with a Buy rating and a target of CA$2.15 last April.

“In our view, World Copper has transformed from an explorer into a developer with a portfolio of high-quality copper projects in premiere copper mining jurisdictions,” Combaluzier wrote. “We believe Escalones shows compelling economics when compared to other copper development projects and that it offers lots of potential for resource expansion. Additionally, we believe Zonia has lots of untapped potential, as it could either be rapidly developed for nearer-term production or potentially be expanded through exploration to increase the scale of the project.”

The Catalyst: ‘Looming Mismatch’ Between Supply, Demand

According to a report last summer by S&P Global, there is a “looming mismatch, on a global basis, between available copper supply and future copper demand resulting from the energy transition.”

Another analyst, Taylor Combaluzier of Red Cloud Securities, initiated coverage on the company with a Buy rating and a target of CA$2.15 last April.

The effort could be short-circuited unless “new supply for ‘the metal of electrification’ comes online in a timely way,” the authors wrote.

The demand is expected to double from about 25 million metric tons (Mmt) in 2021 to about 50 Mmt by 2035, according to the report. Electric vehicles (EVs), their charging infrastructure, solar panels, wind, and batteries all require much more copper than fossil fuel-based technology.

“Copper is critical to the green economy, and in general is just critical overall,” Peterson said. “We can see how even tiny positive news events can cause copper to rise relatively quickly. It has been above US$4 for most of the last two years, and there’s no stopping it.”

Ariz. Project on Agenda

Peterson said advancing the Zonia project is on the agenda for 2023 as soon as the company secures more funding.

Combaluzier said the project could “be a source of nearer-term cash flow” and could help mitigate any political risks in Chile.

World Copper acquired Zonia, about 100 miles from Phoenix, about a year ago when it combined with Cardero Resource Corp.

Combaluzier said the project could “be a source of nearer-term cash flow” and could help mitigate any political risks in Chile.

The mine produced 33.2 million pounds of cement copper from 1966 to 1975. A preliminary economic assessment (PEA) released in 2018 estimated Measured and Indicated resources of 77 million short tons grading 0.33% copper, containing 510 million pounds of copper, and an inferred resource of 27 million short tons grading 0.28% copper, containing 154.6 million pounds of copper.

It also offers potential for expansion, the company reported. An updated PEA is expected in the first half of this year.

Escalones is about 100 kilometers from Santiago. Its PEA released last year estimates an inferred resource of 426 million tonnes of 0.367% copper, containing 3,447 pounds of copper.

Ownership, Coverage, and Share Structure

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Wealth Minerals owns about 18% of the company, about 27% is owned by management and insiders, and the rest is retail.

The company is followed by analysts Taylor Combaluzier of Red Cloud Securities, Siddharth Rajeev of Fundamental Research Corp., and Steven Ralston of Zacks Investment Research. Newsletter writers The Critical Investor and Clive Maund also follow the stock. Click “See More Live Data” in the data box above to view the company’s latest updates. 

Its market cap is CA$23.31 million. It has about 114 million shares outstanding, including 77.4 million of them free-floating. It trades in a 52-week range of CA$0.97 and CA$0.135.

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Disclosures: 

1) Steve Sobek wrote this article for Streetwise Reports LLC. He or members of his household own securities of the following companies mentioned in the article: None. He or members of his household are paid by the following companies mentioned in this article: None.

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( Companies Mentioned: ELECF:OTCMKTS, WML:TSX.V; WMLLF:OTCQB, WCU:TSX.V; WCUFF:OTCQB, )