COPPER 360 CEO Jan Nelson plans to double investors’ money in 2024. The next six months will show if he can do it.
In that time, he plans to start generating positive cash flow, become partly independent of Eskom and flesh out plans to triple production. The firm’s year-end is February; the all-important results are in April. Start the clock.
It may seem harsh to be judging Copper 360 a year after listing, but it’s worth remembering Nelson brought Copper 360 to the market in April on a ticket of can-do pragmatism. He also has form as the former CEO of gold producer Pan African Resources, which resuscitated the richly resourced but clapped-out Barberton Mines in Mpumalanga.
The Northern Cape copper fields he’s developing, roughly triangulated between Concordia, Springbok and Nababeep (with O’Kiep and its mine, O’okiep, in the middle), were previously operated by Newmont and Gold Fields. The oxide tailings they left behind are accessible and provided cheap early production of copper plate produced at a solvent extraction/electrowinning (SX/EW) facility at Nababeep that Copper 360 built.
Forecasts of multiyear deficits in copper are also incentivising primary production, such as the relatively shallow Rietberg mine that Copper 360 is about to open. A concentrator to treat the sulphide ores from Rietberg is due for commissioning in November, also at Nababeep. All being well, the company is targeting cathode production of 2,000t between now and 2025.
The two revenue streams — copper plate from the tailings and cathode from the mine — are forecast to catapult Copper 360. Much rests on Rietberg, however, as it represents 80% of a forecast R100m in monthly revenue, based on current prices. Rietberg is also key to achieving forecast mine gate costs of $4,200 to $4,500 a ton, against a current copper price of about $8,500 a ton.
The firm’s share price is R3.80, slightly below the R4 a share in the initial public offering in February, but Nelson says he is not worried. “I don’t look at the share price, to be honest,” he said in a recent interview. He estimates it could be R8 a share in 12 months, though it could only help if the share were easier to buy. A marketing campaign to attract more retail investors in South Africa is planned for next year, he says.
Assuming Nelson gets operating momentum from November, the aim is then to grow volumes. Mining investors don’t always love expansion unless it’s low-capital-intensive. Nelson says it’s a no-brainer. “If we do the right things we will be in a good position in a year’s time,” he says.
A recently announced increase in the mineral resource base at Rietberg, to about 81,200t from a previous estimate of 25,275t, gives Nelson confidence that a second concentrator tripling cathode output can work, though it may involve an equity issue to pay for it.
If a second concentrator is built at Nababeep it will effectively become a central services hub treating sulphide ores from up to 13 additional mines, each within a 15km radius. A further 60 prospects await exploration in the larger tenement area.
It’s bold of course, but Nelson is renowned for his bullishness, especially on the subject of South Africa’s faltering business environment. “If all the other miners complaining about conditions here don’t like it, why are they still here?” he asks. He claims to be indifferent to a new mining property cadastral system and says the firm’s power will make light of energy shortages. Diesel and solar power will make the company all but independent of Eskom. Discussions with a renewables provider are under way, though they are far from concluded.
But if Copper 360 isn’t hitting the straps by year-end, Nelson could be in for a rough ride. In August, the firm restated its provisional numbers, reporting a heavier taxed loss. (Nelson argues the numbers reflect Copper 360 before it was in development.) The company also hasn’t, so far, made as much as it hoped from copper plate.
Global copper demand projections are also fuelling the feeling for Copper 360 and rival copper development firm Orion Minerals. Opinions are largely split, though, on how much support there will be for new production. Estimates on electric vehicle production vary, though Nelson thinks the greater demand prospects will come from global grid expansion, both in renewables and fossil fuels. The greater kicker for the market is the ability of miners to supply the forecast market deficit.
First-half production from the world’s largest copper miners, accounting for 55% of all production, fell 2% year on year representing a six-year low, according to a report by banking group UBS. While it acknowledges that some analysts foresee a wave of new expansions filling the deficit, the bank is sceptical.
“The copper industry has a very bad track record of meeting guidance,” it said. “We do not see strong evidence to support this changing. As a result, we have a more cautious view on the supply outlook into 2024, and see a balanced market.”
This article was first published in the Financial Mail.