Copper price run, chairman’s on-market buying sends Cohiba shares north

Special Report: There’s no greater demonstration of confidence in a junior explorer than when the chairman puts in more of his own cash to top up his shareholding via on-market buying.

Add to that copper prices hitting their highest point in eight years and you have the perfect storm for Cohiba Minerals’ (ASX:CHK) shares to take off.

Executive chairman Mordechai Benedikt this week boosted his stake to 5.77 per cent, earning him a spot as a substantial shareholder.

Benedikt spent $381,926 in the past week to pick up more shares after having already spent $461,768 in December.

Subsequently, Cohiba this week received a query from the ASX after shares surged 81 per cent from 2.1c on the last day of 2020 to an intra-day peak of 3.8c on Thursday.

Market commentators believe the copper market right now has all the hallmarks of a “super-cycle”.

Copper prices – seen as a gauge for global economic health – are at their highest point since early 2013.

Three-month copper prices on the London Metal Exchange rose to $US8,103.50 ($10,447) a tonne this week, which is an eight-year record.

Researchers at Argus say the copper concentrate market is likely to remain tight throughout 2021, with demand growth poised to significantly outpace production hikes and launches.

Global supply of copper concentrate is due to increase by about 1 million tonnes next year as mines expand but this will not be enough to meet projected demand, Argus says.

“Demand growth is likely to outpace the start-ups, particularly as China’s smelting capacity continues to ramp up without the constraints of the COVID-19 pandemic seen in the first half of 2020,” it says.

Overall, about 1.2 million tonnes per year of new Chinese smelting capacity came on stream in 2018-19, a 12 per cent increase on previous capacity.

But so far these smelters have only been operating at moderate utilisation rates, Argus says.

“Mining companies argue that the copper concentrate market will be tighter next year, pointing to higher demand as China’s smelting capacity expands and potential supply disruptions from South America and Australia caused by workforce reductions to combat the COVID-19 virus, plus Australia-China trade tensions,” Argus says.

And over the next 10 years demand for copper from traditional end-users will remain solid, while its exposure to the “electrification mega-trend” offers attractive upside.

One electric vehicle uses about 83kg of copper. Under the IEA’s EV30@30 Scenario, EV sales reach 44 million vehicles per year by 2030.

“You have all the tell-tale signs of a super-cycle,” Jeff Currie, head of commodities research at Goldman Sachs, told Bloomberg in December.

He pointed to metals hitting multi-year highs, the weaker US dollar, crude oil reaching $US50, and rising global liquidity.

“Copper prices have recently increased to all-time highs and the demand for the metal will continue to increase as the market remains undersupplied,” Cohiba said in its response to the ASX share price query.

“Some industry experts are predicting record highs in copper prices for 2021 based on end-users replenishing stocks post-lockdown, governments’ copper-intensive green stimulus packages and an undersupply of copper scrap.

“These factors may have had a positive effect on the company’s share price.”

Strong investor interest

Investor interest has been strong in Cohiba in recent months, with the company in December closing its share purchase plan early after receiving applications for nearly 5x the $2m it was targeting.

The company decided to increase the size of the SPP and accept oversubscriptions to raise $5.3m.

The cash will be used to expand Cohiba’s exploration push at the Horse Well and Pernatty C projects in South Australia, as well as investigating new iron oxide-copper-gold (IOCG) targets at Lake Torrens, also in South Australia. The projects are part of the broader Olympic Domain landholding.

Cohiba has uncovered multiple targets in close proximity to world class deposits like BHP’s (ASX:BHP) giant Olympic Dam and OZ Minerals’ (ASX:OZL) $1bn Carrapateena copper-gold mine, which began production in December last year.

The company recently finished drilling four deep holes at the Horse Well prospect, where previous comprehensive geophysical analysis indicated the presence of a major “feeder” system believed to be associated with IOCG mineralisation that is comparable in size to the Olympic Dam feeder system.

Cohiba said the close proximity of its Olympic Domain project to BHP’s Oak Dam West deposit, where exploration returned some significant, high-grade copper intersections, had possibly generated increased interest in the Olympic Domain project.

This article was developed in collaboration with Cohiba Minerals, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.