For the past two weeks I have written advised subscribers to look at copper and industrial metals as I saw deep-pocketed private equity funds and billionaires such as Carl Icahn and KKR taking big bets on beaten down Dr. Copper hitting five year lows. I knew that a bottom could be forming and that we might be near the final turn. It was my first copper bet in many years.
Now it appears that the call of a bottom in copper and industrial metals may be confirmed by the recent news that Glencore (LONDON:GLEN) is cutting global zinc production. Copper and nickel could be next. The commodity giants like Glencore are in great financial duress right now shutting down mines left and right thanks to low commodity prices. It recently shut down two mines in Africa.
Other industrial metals -- though most notably copper -- are also rising as the recent downturn in prices has forced many of the high-cost mines to shutter because their owners could not turn a profit. The news out of Glencore over zinc has also shocked the copper market, highlighting the painful effects the commodity crash has had on even the most robust miners. There is a coming supply shortage in the commodity space that may prove unparalleled.
1) Pay attention to Excelsior Mining (TO:MIN), which just announced that it has purchased out of receivership acopper mine adjacent to their Gunnison Project in Arizona and will be raising $12 million. The mine comes with a working solvent extraction plant, which could process solutions from Gunnison saving time and money to get into production. Commenting on the Johnson Camp Transaction, Stephen Twyerould, President and CEO of the Company said, “This is expected to allow us to significantly reduce our upfront capital requirements and the time required for the start-up of the Gunnison Project. The Company also intends to thoroughly examine the potential of Johnson Camp, especially since this is the first time in its 130 year history that the entire Johnson Camp district has been consolidated under one ownership.”
Excelsior’s Gunnison Project is possibly the lowest cost and most advanced project in the US in control of a junior miner at the prefeasibility stage. Because of the uniqueness of the project, copper can be recovered through In-Situ Recovery (ISR). I learned about ISR from the low-cost ISR producer Uranerz Energy, which was acquired by Energy Fuels (NYSE:UUUU) earlier this year.
2) Also keep a close eye on Uranium Resources (NASDAQ:URRE) whose merger with Anatolia has drawn deep support from both sides. That deal could make URRE a near-term, low-cost producer with the Temrezli Project. Cost savings were impressive and the company could be well positioned after the consolidation for the coming upturn in uranium prices. Don’t forget that URRE has many idled projects in the US, which could also provide leverage to a rebound in uranium prices. In the meantime, URRE will now have the Temrezli ISR Project, which is at the feasibility stage and could be profitable even at these low uranium price point. That merger should close around November 9.
3) An early stage nickel explorer in Voisey’s Bay is Equitas Resources, which continues to excite, grabbing the attention of the junior mining investment community. It recently acquired additional claims to the west of its Garland Property, on which it is currently drilling.
Disclosure: I own shares in MIN, URRE and EQT. They are all website sponsors so I do have a conflict of interest as I would benefit if the share price increases. This is not financial advice. Please do your own due diligence as there are many risks.