Barry FitzGerald: Small cap? Check. Exploration under way? Check. Next stop – the Big Time
The sky has not fallen in on the copper market, yet the share prices of the ASX-listed copper stocks have been taking a pounding.
The copper price is down all right. But the 7.6% fall from first half average of $US3.95/lb to $US3.65/lb mid-week is hardly calamitous.
The price remains at historically high levels and if a producer can’t make money at the current price, with the revenue-boosting benefit of the low US exchange rate, then it really should have a good hard look at itself, or its project.
There is good news in all that given the producers are cheaper than they were at a time when a powerful thematic is coming in copper market – the expected monster supply deficit coming in the back third of the decade because of the electrification of everything so the world can decarbonise.
To encourage new supply, prices will have to go higher, with Citi not alone in tipping prices could be 50% higher at $US5.45/lb by 2025 as the scale of the supply deficit becomes clear to all.
Having said all that, the reality is the copper producers have been doing it tough in the here and now because of the broader pessimism around global economic growth, particularly in China. Stocks like Aeris (ASX:AIS) and Aurelia (ASX:AMI) have been savaged.
It has been no better for those in Garimpeiro’s playground, the junior explorers. They are the very bunch the world needs to be finding new deposits for development in the back third of the decade to meet the supply challenge.
Again, there is good news in that as they are also cheaper than they were. They have been getting down to micro-cap levels which, to Garimpeiro’s way of thinking, means they come with even more share price leverage to making a discovery.
So Garimpeiro went looking during the week for junior copper explorers with small market caps and active exploration programs on rated projects which give them a shot at the big time.
The common theme between the two is that rock-kicking types have told Garimpeiro that their exploration programs have the potential to excite.
Firetail: It has a bunch of lithium and nickel interests in Australia but the excitement around this one is what it might hit in its just started exploration program at the Picha copper project in southern Peru, to the west of Lake Titicaca.
Green rocks at surface, 100 year-old copper scratchings, producing mines to the north and south, porphyry potential and an active epithermal system potentially juicing up the copper mineralisation – it’s got it all from a target perspective, but has been totally overlooked in the modern era.
Now for the test with the drill bit. The maiden drilling campaign by Firetail involves about 5,000m across four targets. Firetail has 80% of the action after picking up the project from Canadian uranium explorer Valor (ASX:VAL) which retains a 20% stake in the project, and an equity position in Firetail.
Firetail was trading at 10c mid-week for a market cap of $14.8m.
Strategic Energy Resources: An Explorers Podcast with SER boss David DeTata has just gone up on Stockhead.
But for the hearing impaired, Garimpeiro notes that it was trading mid-week at 1.3c for a market cap of $6.5m.
That’s not a lot for an ASX company of any description let alone a “science-driven’’ explorer for Tier 1 nickel-copper-gold discoveries in greenfield areas.
More to the point, a drill rig is whirring away at a joint venture SER has with Fortescue in Queensland at the Canobie prospect. Fortescue can earn 51% by spending $4m and can get to 80% by spending another $4m.
It fits SER’s modus operandi of working the science to come up with fresh Tier 1 targets, and to then bring in a group with deeper pockets to fund the drilling. There is nothing wrong with a $6.5m junior owning 20% of a big discovery.
SER is working up other projects along similar lines.
At Canobie there is a nickel target to test, and then iron oxide copper gold targets like Evolution’s Ernest Henry copper/gold mine some 140km to the south.
SER said in mid-September that assay results would begin to flow in November.
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