Copper is often said to be the ultimate green energy transition metal, essential for transmitting electricity for use in almost all modern day devices. Solar systems, wind turbines and electric vehicles all rely heavily on copper components.

The International Energy Agency (“IEA”) forecasts copper demand to increase 2-3x from 2020 to 2040, similar to Trend Investing’s forecast of 2.3x from 2020 to 2037. As we move towards a world of lower emissions, copper’s importance grows significantly.

The top 4 copper producing countries in order are Chile, Peru, China, and the Democratic Republic of the Congo (“DRC’).

While the DRC has its risks, the country is known for its exceptionally high grades of both copper and cobalt. Today’s company has invested into the DRC copper/cobalt mining sector and has a new producing mine.

Critical Metals PLC (LSE: CRTM) is now a new copper producer

As announced by Critical Metals on January 26, 2023: “Copper oxide production commenced at the Molulu Project, an ex-producing copper-cobalt mine in the Democratic Republic of the Congo.” Critical Metals owns 100% of Madini Occidental Limited, which holds an indirect 70% interest in the Molulu copper-cobalt project in the DRC. The project is forecast to produce an initial 120,000 tonnes pa of copper oxide ore. Critical Metals states: “The copper ore produced in January 2023 will be stockpiled for sale into the market in February 2023. All copper material extracted from the mine will be sent to local processing plants, of which there are four in the Likasi and Lubumbashi areas expressing interest in purchasing Molulu copper ore.”

The Molulu Project is an ex-producing, medium scale copper-cobalt project in the Katangan Copperbelt, adjacent to producing mines previously mined by artisanal miners. Molulu has very high grades. According to the company: “Molulu’s copper grades range between 15% & 40% (sulphides) and 2% and 15% (oxides). Cobalt areas have been identified and will be drilled for confirmation”, and comments: “The Project’s fundamentals provide the potential for a long lived, low capital cost and high operating margin copper and cobalt mine in the DRC.”

Critical Metals development plan

Critical Metals plans to carry out additional exploration work at the Molulu Project. A $200,000 drill program will be designed and initiated to further delineate the copper strike length and depth and to create a JORC compliant resource. There are numerous anomalies that have been discovered and are considered worthy of further investigation in order to potentially grow the resource and ultimately production (see image below).

Heat Map of Minière Molulu Copper/Cobalt showing numerous copper and cobalt anomalies yet to be investigated further

Source: Company presentation

The Company also intends to seek further potential investment opportunities in the DRC.

Closing remarks

High grade copper and cobalt producing mines are rare but are commonly found in Katangan copper belt of the DRC. The country is not without significant sovereign risks, but if these can be managed the rewards can flow from the high grade copper and cobalt mining in the region.

Critical Metals PLC trades on a market cap of only ~C$15 million.

Some names are synonymous with certain industries, at least to me. Rockefeller is oil, with John D. being the founder of Standard Oil in the 1870s with a legacy that is still front and center today having spawned the likes of ExxonMobil and Chevron to name a few. J.P. Morgan is banking/finance (and railroads) with his name still emblazoned on one of the world’s largest banks today.

Maybe not quite in the same league, but certainly an iconic name in the commodities industry is the Swedish-based Lundin family whose history in mining began over forty-five years ago with founder Adolf H. Lundin. Today the Lundin Group of Companies comprise twelve individually managed public companies focused on the resource sector. The commodities the companies are involved in include copper, gold, silver, zinc, diamonds, and oil & gas.

Today we’ll focus on the Toronto listed Lundin Mining Corporation (TSX: LUN). Lundin Mining is a diversified Canadian base metals mining company with operations and projects in Argentina, Brazil, Chile, Portugal, Sweden and the United States, primarily producing copper, zinc, gold and nickel. Q1/22 sales by metal were 69% copper, 11% zinc, 11% nickel, 6% gold and 3% other, with the Candelaria copper-gold mine accounting for 46% of Lundin Mining’s first-quarter sales. Based on these statistics it should come as no surprise that Lundin Mining’s stock price has a reasonably strong correlation to the price of copper. As seen in the chart below, Lundin Mining has slightly underperformed copper over the last year despite starting 2022 on a pretty good run.

Source: StockCharts.com

The reason for this strong correlation becomes quite apparent when you consider that Lundin Mining’s 2022 guidance for copper production is 258,000 – 282,000 tonnes, representing over 1% of global copper production, which stands at just over 20 million tonnes per year. Perhaps not a dominant position but certainly a material player in the copper world. With that said, zinc production guidance of 188,000 – 203,000 tonnes represents almost 1.5% of global zinc production. Zinc prices had a good run from March to May of this year, so that could explain some of LUN’s outperformance relative to copper over that period. Nevertheless, you are getting into rarefied air when it comes to companies that can claim they produce over 1% of more than one globally important commodity. Especially when you consider that LUN has a market cap of just over C$6 billion compared to the mining giants like BHP at over US$200 billion or Rio Tinto at roughly US$100 billion.

Another thing I find intriguing about Lundin Mining is that it’s sitting on a lot of cash, which is forecast to continue growing based on their guidance. At the end of April, 2022 the Company had a cash balance of approximately US$680 million after paying dividends of approximately US$115.0 million and effectively no debt. More than half of the dividend was a semi-annual performance dividend, which as you can figure out from its name, won’t be paid again until October. When you think that Lundin Mining increased cash and cash equivalents by US$140 million in Q1 and guidance suggest that production and costs should remain comparable then it’s solely a call on commodity prices as to how much cash keeps rolling into the coffers. That suggests to me that a transformational acquisition could happen or perhaps a special dividend or share buyback if no accretive acquisitions can be found. Either way, as long as copper prices find a floor, shareholders could be rewarded handsomely.

Lundin Mining is a large, established multi-national mining company with a pretty good pedigree in the industry. They have reasonable diversity geographically in relatively stable countries, which sadly is becoming more of a consideration for investors these days. The share price is highly correlated to copper, so if you are looking for a way to play copper prices while still getting a 4% dividend yield with the potential upside that could be derived from an almost US$700 million war chest, then Lundin Mining might be just the investment you were looking for.

In this InvestorIntel interview with host Byron W. King, Troilus Gold Corp.’s (TSX: TLG | OTCQX: CHXMF) CEO and Director Justin Reid talks about the significant resource growth potential for the Troilus Gold-Copper Mine in the upcoming update to its mineral resource estimate and PFS expected in July 2022.

In the interview, which can also be viewed in full on the InvestorIntel YouTube channel (click here), Justin Reid discusses progress in restarting their past-producing Troilus mine and the coming update to their current open-pittable resource of 8.1 Moz AuEq. With $30 million in the bank and about 60% institutional ownership, Justin explains how the Troilus mine is positioned to be among the top 5 gold producers in Canada and the largest copper producer in Quebec.

Don’t miss other InvestorIntel interviews. Subscribe to the InvestorIntel YouTube channel by clicking here.

About Troilus Gold Corp.

Troilus Gold Corp. is a Canadian-based junior mining company focused on the systematic advancement and de-risking of the former gold and copper Troilus Mine towards production. From 1996 to 2010, the Troilus Mine produced +2 million ounces of gold and nearly 70,000 tonnes of copper. Troilus is located in the top-rated mining jurisdiction of Quebec, Canada, where is holds a strategic land position of 1,420 km² in the Frôtet-Evans Greenstone Belt. Since acquiring the project in 2017, ongoing exploration success has demonstrated the tremendous scale potential of the gold system on the property with significant mineral resource growth. The Company is advancing engineering studies following the completion of a robust PEA in 2020, which demonstrated the potential for the Troilus project to become a top-ranked gold and copper producing asset in Canada. Led by an experienced team with a track-record of successful mine development, Troilus is positioned to become a cornerstone project in North America.