Jan. 24, 2018 04:40PM PSTBase Metals
Author Gianni Kovacevic shares his thoughts on electric vehicles and their impact on the copper market. He also discusses lithium and cobalt.
Speaking with the Investing News Network at this year’s Vancouver Resource Investment Conference, Gianni Kovacevic, author of “My Electrician Drives a Porsche?,” shared his thoughts on electric vehicles (EVs) and their impact on the copper market.
As demand for EVs increases, many market participants expect the need for copper to surge. In fact, research suggests that copper demand from EVs could rise by as much as nine times in the next decade.
“The demand for copper will increase in the next 20 years by about 50 percent due to the intensive electrification of global energy,” Kovacevic said. He also shared his thoughts on other metals such as lithium and cobalt, key components of electric car batteries.
Finally, Kovacevic, who is also executive chairman of CopperBank Resources (CSE:CBK), talked about some of the milestones that investors can expect from his company.
Watch the video above read the transcript below to learn more of his thoughts on copper, battery metals and his four “must-own” copper stocks in 2018. And don’t forget to check out our other videos from the show. The transcript for this interview will be added shortly.
INN: Last year, we saw copper gain and outperform gold. Do you expect that to happen again this year?
Gianni Kovacevic: Maybe it was a little bit of catch-up. The question is not really what’s going to happen in six months or a year, but looking forward to five and ten years. I do believe that the demand for copper is going to increase in the next 20 years or thereabouts by about 50 percent. So, the CAGR growth won’t be the historical 3 percent, it could be more. This is simply due to the intensive electrification of global energy, the way we generate it, the way we transfer it, and the way we utilize it. In the future, of course, there will be some substitution, but in the long run I do see a lot more demand.
INN: There’s a lot of excitement about copper demand in terms of electric cars and what’s happening with the whole electrification of energy. What are your views on that and when can we expect the demand to hit the market?
GK: Well, electric cars is one thing, and I think there’s going to be demand there and one can argue when will we achieve 10 percent penetration of the electric car. There’s been some pronouncements by governments that by 2035 or 2040, they won’t allow the petroleum engine anymore. That might be a little bit difficult to do.
The real use of copper, the big user is the energy mix, all of it. When you look at the generation of a wind park, it takes 500 percent more copper and when they do this offshore, it takes 1000 percent more copper for each megawatt. There’s a lot more copper in that application than there is in the electric car. But it’s basically, it’s in all of the above. It does not matter when you’re going away from fossil fuels including things that are off grid because when you’re off grid, you have by nature, you have solar or what have you or a mix, it takes more copper.
INN: If you have to give one suggestion or one piece of advice to a new investor in the base metals sector in particular, what would it be?
GK: There is two camps. There’s the camp that wants the margin of safety and the price is volatile. So, they look at having the top 10 or 20 of the future projects, really strong economics and does this project work in $2.75 copper or $3 copper? I look at it differently. First, you ask yourself if we’re going to need more copper in the future even looking at substitution, what is the grade of the future copper mine in the next 10, 20, 30 years? It’s a lot lower.
Most people don’t recognize or probably maybe don’t appreciate that in the year 2010, if you look at the 50 largest copper producers, the average grade that ran through their mills was 1.2 percent. In 2016, that was 0.72 percent. But when you look at the reserve profile for the projects in the future and the resources of those projects that maybe don’t quite have feasibility level, we’re talking, copper only, 0.3 percent or 0.35 copper. You really need to include the equivalent number, and when you reverse engineer that, this is not economic because of the simple math. Today, copper is trading at $3.20 a pound or $7,200 a tonne on the LME. If the copper ore is 1 percent, the tonne of that ore is worth $72.
The future is not 1 percent. It’s 0.5 percent or 0.3 percent. A tonne of that ore is worth $30 or $35. It doesn’t work. The math does not work. We should see, I would think, I’m not a prognosticator of the price but will we see a $4 on the copper price? Probably. Could we see a $5? Maybe. If you want to make a 0.3 percent copper of sulfide mine financeable, that’s the only way it’s going to be possible.
INN: There was also a lot of excitement last year about battery metals like lithium and cobalt. Do you follow them as well and do you expect them to perform well in 2018?
GK: Indeed. Batteries is an exciting field and there’s an army of people working in the battery space. I always tell people, there’s probably millions of people around the world working on this and what is it? It’s technology.
How will the chemistry change for batteries way in the future, 5, 10, 15 years? We don’t know, but they’re working on it. The chemistry may impact things like cobalt. But cobalt, will it still be relevant to the battery even if they go to these 8:1:1 chemistry, if you will? Lithium, will it still be there? They both have different pressure points.
The pressure point for cobalt is that it’s just so rare. Geologically, it doesn’t occur as frequent as some of these other commodities. For that reason, it might get substituted out in some cases. Lithium, however, is very abundant and if they start building these large lithium projects which people are talking about and we saw just one week ago, there’s the new exportation cooperation between SQM (NYSE:SQM) and Corfo, they were able to quadruple their output of lithium.
So, the backlog is now, the chemistry may change, copper still wins the marathon. I think if you’re investing in lithium, you want to be in the place that’s got the most prolific resource reserve production profile. To me, that’s the Salar de Atacama, the companies that are operating there. Of course, I’m invested in Wealth Minerals (TSXV:WML) so for open disclosure.
INN: Here at the VRIC, you’re going to be speaking about the four must-own copper stocks. Can you share which ones they are with our audience?
GK: I will. I own all of these names, of course for disclosure. CopperBank (CSE:CBK), which is a company I’m the single largest shareholder of. It offers tremendous optionality. We waited for the normalization of copper markets. We’re looking to do a strategic, creative advancements for our shareholders. So, not only we’re looking at share price appreciation, we’re looking at other ways to monetize the asset value on our projects.
I was also in Chile. I just came back. I spent a week down there and I looked at the projects owned by the Lundin Group of Companies. I’m talking about NGEx Resources (TSX:NGQ) which has the Los Helados and Josemaria projects, and Filo Mining (TSXV:FIL) which they spun out which is now going to have a robust drill program this season and they’re going through now with pre feasibility. These projects look very interesting. There’s a huge resource between not just these, but the area, and I think people want to look at those for optionality and development success, and you still have a lot of blue sky exploration.
If people like to invest in sort of exciting drill hole plays, Aston Bay (TSXV:BAY), what they’re going to drill next summer in Nunavut, I think Dave Broughton and Tom Ullrich have created a lot of science, two years of effort to come up with these drill targets. That’s going to be highly anticipated. I think a lot of catalyst value, a lot of smart people are waiting for that. I can see that stock having more buying pressure because– as people await that.
The last one is a copper-gold company, Lumina Gold (TSXV:LUM). It’s called Lumina Gold but it’s got a big copper kicker. They’ve got assets in the southern part of Ecuador and you would see them with Lundin Gold (TSX:LUG) and SolGold (TSX:SOLG) and other companies that have had a lot of success there. It’s a gold company masquerading as a copper company or vice versa, and it’s a Ross Beatty name. Look at the chart. It hasn’t really moved. They doubled their resource last year for very little money. I like what that team is doing. So, that’s a nice little mini portfolio for people that are looking for copper, maybe some excitement, and a little bit of gold exposure at the same time.
INN: Finally, you’re an executive chairman for CopperBank. What milestones can investors expect this year from your company?
GK: Well, we very carefully measured how can we enhance the value of our various projects. So for those that don’t know CopperBank, we bought three projects on a 100 percent basis in 2014, so during the bear market. We understood very carefully how we can do these enhancements.
We did some drilling last year but on all three of our projects, we’re looking to do creative work programs that may include, forward-looking statement, we may look to segregate one of the projects and that would happen potentially from a spin out and that people can look at our previous press releases. But the sum of the parts, if these assets were segregated, would they still equal the market cap of the company today?
We’ve had a lot of insider buying so obviously, we don’t think so. We think the company’s undervalued and I encourage people to very carefully follow the news flow on how that could work forward and look at the sum of the parts on what CopperBank represents.
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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
Editorial Disclosure: Wealth Minerals is a client of the Investing News Network. This article is not paid-for content.
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