Copper Industry Sees Surge in Demand and Prices

Source: Streetwise Reports 05/28/2024

With copper prices soaring amid supply shortages and the green energy transition, four companies might benefit.

As copper continues to surge above US$11,000 per ton, some analysts say it is time to jump in the new copper market. As the prices for copper have soared due to financial investors betting on supply shortages and a massive squeeze in the New York market, pushing them to record highs this week, it many analysts are seeing bright things in its future.

"Comex's short squeeze is redirecting copper to the U.S., depleting inventories elsewhere" said Gong Ming, an analyst with Jinrui Futures Co. "The Chinese market is likely to see inventory withdrawals soon as exports rise." The demand for copper has surged due to its crucial role in the energy transition, with supply disruptions and sustained price rallies drawing more financial investors into the market.

The Catalyst: Copper's Vital Role in Energy Transition

Javier Blas of Bloomberg Opinion noted that copper is increasingly being viewed as the new oil in the context of climate change, essential for electrifying everything from vehicles to heating systems.

"In the climate-change era, copper is the new oil" Blas wrote, emphasizing the metal's critical role in the energy transition. Despite this, Blas cautioned against over-exuberance, highlighting that the physical copper market, particularly in China, remains weak with historically low premiums.

CRU Group, a metals market consultancy, presents a more nuanced view, projecting copper demand to reach 35 million tons by 2050, significantly lower than the most bullish forecasts. However, the supply side also presents challenges, as the easiest deposits have already been tapped, requiring new production from lower-grade ores and more difficult geographies.

In Pretriotates' Thoughts on May 19, the site explained the scarcity of copper, "The prices of the various maturities of futures show whether there is a shortage of supply in the spot market or not. If a higher price is paid over a longer term, there is sufficient copper in the exchange warehouse (contango). However, if stocks become scarce, a higher price is paid for futures with a shorter term — this is known as 'backwardation.' On the London Metals Exchange (LME), the situation has just changed from contango to backwardation. The copper stock is slowly running out."

On that same day, Richard Mills at Ahead of the Herd also called attention to the supply and demand situation for copper, writing, "That supply is locked up. It's been previously stated that we need to find 6 million more tonnes of copper, 1 million per year of new copper production if we want to alleviate the deficit — the equivalent production of one Escondida mine each year — but only one of the five mines, Kamoa, has the capability of producing close to that much copper. But Kamoa's production is going to China."

According to Mordor Intelligence, the copper market is significantly shaped by the growing demand in the electrical and electronics segment. Copper is extensively used in applications such as wires, cables, dynamos, transformers, motors, electromagnets, switches, communication cables, and residential electrical circuits due to its excellent conductive properties. The rise in electric vehicle production has also boosted copper demand, as components like foils, stators, rotors, shaft heads, hollow wires, and motors in these vehicles are copper-intensive.

Mordor Intelligence reports that the global production by the electronics and IT industries increased by 11% year over year in 2021, reaching US$3,415.9 billion, according to the Japan Electronics and Information Technology Industries Association (JEITA). This growth is expected to further drive demand for copper in the electronics sector. In the United States, the Consumer Technology Association (CTA) projects the consumer technology sector to grow to US$505 billion in retail sales revenue by the end of the year, with a 2.8% rise in sales over 2021's growth. This increase in demand for new technological products is anticipated to expand the copper market during the forecast period.

With this, we wanted to share some companies on the Streetwise list that may benefit from the copper market.

Blackwolf Copper & Gold Ltd.

Blackwolf Copper & Gold Ltd. BWCGF has a history of finding promising results, Red Cloud Securities analyst Taylor Combaluzier noted earlier this year, a record of success that prompted strategic shareholder Frank Giustra to increase his stake in the company in late October of 2023.

Blackwolf recently announced that it found grades as high as 19.9 grams per tonne gold (g/t Au) on the company's Cantoo property, located in Alaska's Golden Triangle.

Combaluzier rated Blackwolf a Buy with a target share price of CA$0.55 and a more than 350% increase from the price at the time of the report. The company's stock could have even more potential, he noted. "Positive exploration results and/or a discovery could potentially help drive the stock price higher."

As Jay Taylor from Hotline noted on May 10, "Blackwolf Copper & Gold Ltd. and Treasury Metals have announced they are upsizing their combined merger-related financing from CA$4M to CA$6.4M . . . this combination renders Blackwolf a near-term producer while providing the combined entity some exceptional exploration projects in British Columbia and Alaska."

Technical Analyst Clive Maund took an in-depth look at Blackwolf on May 2 and came away with a strong outlook.

Maund wrote, "The conclusion is that Blackwolf Copper and Gold is trading at an extremely low price after a severe and prolonged bearmarket and it is showing strong signs that it is very close to completing a low level basing pattern that will soon trigger a breakout into a major new bullmarket against the background of the gathering copper and gold bullmarket. It is therefore rated an immediate Strong Buy for all timeframes."

According to data from the latest press release, management and insiders hold 19.23% of the Blackwolf Copper & Gold. This includes Frank Giustra.

With this transaction, Treasury Metals, along with other strategic investors, holds 37.03%

The rest is with retail.

According to Market Watch, the company currently has a market cap of approximately CA$15.32 million, trading within a 52-week price range of CA$0.09 to CA$0.37.

Granite Creek Copper Ltd.

Granite Creek Copper Ltd. GCXXF is gaining traction with its promising Carmacks project in Yukon, Canada.

As Ryan Walker of Echelon Capital Markets said in August, "Granite Creek Copper Ltd. is seeking to attract a major company to consolidate a Yukon Territoy area into a local copper giant.

According to Granite President and CEO Timothy Johnson, the company's CA$220M Carmacks project and the past-producing Minto Metals mine could form a 30-year operation to produce 2 Blb copper. There are many undrilled targets at Carmacks, and the district as a whole is ripe for consolidation."

According to Reuters, insiders own 5.74% or 9.23 million shares of Granite Creek Copper. One of the five insiders is the Chairman of the Board, President and CEO Timothy Johnson, with 2.54% or 4.08 million shares. The other four, all directors, are Robert Sennott with 1.87% or 3.01 million shares, Michael Rowley with 1.06% or 1.71 million shares, John Cumming with 0.26% or 0.42 million shares, and Loy Chunpongtong with 0% or 0.01 million shares.

The company does not have any institutional investors.

Retail investors own the remaining 94.26%.

Granite Creek has 198 million shares outstanding and 188.77 million free-float traded shares. The company's market cap is CA$8.9 million, and it trades in a 52-week range of CA$0.03 to CA$0.08 per share.

Stillwater Critical Minerals

Stillwater Critical Minerals PGEZF is developing its flagship copper-nickel project in Montana, U.S.A. The project is noted for its high-grade copper and nickel resources, which are essential for the growing electric vehicle and renewable energy markets.

Analyst Richard Mills from Ahead of the Herd highlighted that Stillwater's project is strategically significant due to its location and the quality of its resources. Mills noted, "The company's assets are crucial for the supply chain, especially given the increasing demand for copper in energy transition technologies."

On April 1, Chris Temple of The National Investor wrote of Stillwater investment opportunities, "Stillwater Critical Minerals is one of my recommendations that has at least some meaningful copper component in the story . . . the company's Stillwater West project in Montana (benefitting anew from investments into the company by Glencore, most recently as the lead/major investor in a current private placement) is a rich, albeit complex, area sporting precious metals, base metals and platinum group metals."

An October report from Couloir Capital had this to say, "We expect the company to add more resources at Stillwater West via the current drill campaign. This should drive the valuation higher."

Couloir then went on to project a bright future, writing, "Even with the revised fair value price, the projected upside for investors in this mining exploration company is still significant, at 106%."

Management and insiders own approximately 20% of Stillwater, according to the company.

Executive Chairman and Director Gregory Shawn Johnson owns 2.95%, President and CEO Micheal Victor Rowley owns 2.58%, Independent Director Gregor John Hamilton owns 1.64%, Independent Director Gordon L. Toll owns 0.51%, and Vice President of Exploration Daniel F. Grobler owns 0.21%, according to Reuters.

Institutions own approximately 25% of the company.

High net-worth investors own about 27%, and Glencore Canada Corp. owns 9.99%. About 18% of the company's shares are in retail, Stillwater said.

There are 197.79 million shares outstanding with 162.25 million free float traded shares, while the company has a market cap of CA$30.66 million and trades in a 52-week range of CA$0.13 and CA$0.23.

Important Disclosures:

1. Blackwolf Copper, Granite Creek Copper, and Stillwater Critical Minerals are billboard sponsors of Streetwise Reports and pays SWR a monthly sponsorship fee between US$4,000 and US$5,000.
2. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Blackwolf Copper.
3. James Guttman wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an employee.
4. This article does not constitute investment advice and is not a solicitation for any investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Each reader is encouraged to consult with his or her personal financial adviser and perform their own comprehensive investment research. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company.