On my Radar: US Copper

Copper. A PEA with an internal rate of return of 23%. In a known copper district with 2.8 billion pounds of copper indicated. What’s not to like? US Copper (USCU.V) has one huge downside: it’s in California. If its Moonlight-Superior project was 100 miles to the East, in Nevada, this would be trading for multiples of its current share price of $0.06.

CEO Stephen Dunn knows this. He knows all about California being seen as a jurisdiction where permitting is very difficult if not impossible. But, as he states in the press release announcing the completion of the PEA,

Copper industry experts highlight a growing worldwide shortfall in production of this critical mineral. These forecasts support our strong belief that our important asset should become a core component of the United States' critical minerals development strategy that aims to ensure essential metals for the energy transition and national security and ongoing demand growth from many economic sectors such as Artificial Intelligence.

A couple of years ago I would have estimated the chances of a mine being built at Moonlight between slim to none. Has anything changed? Yes. In 11 days Donald Trump will be sworn in as the 47th President of the United States.

So what? Permitting is mainly a state matter in the US and California politics is dominated by the very worse sort of anti-development, anti-mining, environmental activists. They hate Trump, hate open pit mining and are more than happy to tie permitting applications up in Court forever. Which is the entire bear case against the Moonlight project.

Dunn’s challenge is to find a joint venture partner with the money and the heft to push a permit through regardless. After all there are active mines in California and, while environmental standards are high, the Moonlight project is in a district where mining has taken place for years. In fact, in the Moonlight-Superior claim block there are three abandoned mines. It is also a good distance from built up areas.

But the ace in the hole is Trump. Specifically Trump’s promise to fast track projects worth at least one billion dollars.

“Any person or company investing ONE BILLION DOLLARS, OR MORE, in the United States of America, will receive fully expedited approvals and permits, including, but in no way limited to, all Environmental approvals. GET READY TO ROCK!!!” Donald Trump December 10, 2024 Truth Social

The US Copper PEA projects a capital cost for the Moonlight-Superior project of just over 1.3 billion dollars. Which would, presumably, qualify the project for the promised expedited approvals of which the Environmental approvals are the most critical. Environmental activists use the federal regulatory process to take projects into the federal court system which is time consuming and expensive. Having an expedited approval might well short circuit this process.

The US has woken up to the reality that it needs a variety of strategic materials including copper both for its national security and to restore and fortify the electrical grid. The US has copper mines but the growth in the demand for copper is expected to be 2-3% per year right through 2035. Copper output from American mines has stabilized or even declined in the last few years.

There is something of a “copper race” on in the US. There is a good deal of interest in the Ivanhoe Electric (Robert Friedland) BHP joint exploration alliance in Arizona, New Mexico, and Utah. To the north, Barrick has invested in Hercules Metals (BIG.V) and Teck and BHP have invested in Scout Discoveries’ properties at Mt Cuddy in Idaho. Barrick has staked all the way up the Snake River following the Izee/Olds Ferry terrane sutures. Bayhorse Silver (BHS.V) is awaiting results from its underground drilling in search of a potential copper deposit on the Bayhorse/Pegasus suture. Finding new copper deposits is attracting significant investor interest.

But where Hercules, Scout and Bayhorse are in the very early stages of defining a potential copper deposit, US Copper has enough information to have a 43-101 compliant Mineral Resource Estimate and has done sufficient engineering to publish its PEA. In that PEA the Qualified Person recommends additional exploratory drilling of between 5000 and 10,000 feet to outline additional resources.

US Copper shares have risen on solid volume since the release of the PEA. At $0.06 with a market cap of just over $7 million, USCU might be an attractive way to gain exposure to the “copper race”.

(Disclaimer: I hold positions in Hercules and Bayhorse Silver which I may trade at any time. This is not investment advice. Do your own due diligence. Call the CEO.)