Junior exploreris expanding its stable of copper projects in Canada as the demand for the red metal is about to hit the world full force during the green energy transition.
The company, which has two projects in British Columbia, has signed a definitive agreement to acquire CAVU Energy Metals Corp. (CAVU:CSX) and its two copper projects .
New copper mines are needed. A recent report from S&P Global called “The Future of Copper” said the amount of copper that will be required between 2022 and 2050 is more than all the copper consumed in the world between 1900 and 2021.
“Our long-term bullish view on Cu (copper) remains unchanged,” wrote Red Cloud Securities analyst Taylor Combaluzier in an August 11, 2022 note initiating coverage on CAVU before the purchase was announced. “Thus, we believe now is a good entry point for investors to position themselves for a future rebound in Cu equities.”
“The increased demand for copper as a result of the burgeoning EV and green economy will provide a compelling catalyst for majors to replenish and grow their copper pipeline over the mid-to-long-term,” Combaluzier wrote.
The S&P report said the next decade or more is critical as the transition to electric vehicles (EVs) and the “electrification of the economy” drive the increasing demand for copper.
“Between today and 2035, achieving the Net-Zero Emissions by 2050 goals will translate into a rapid ramp-up of copper demand, increasing by more than 82% between 2021 and 2035,” the report said.
“Copper is, by weight, the largest component of the green initiative,” Alpha Copper President and Chief Executive Officer Darryl Jones told Streetwise Reports.
The new combined company will “become a premier copper exploration company” with an expanded portfolio in British Columbia and the Yukon, according to Alpha.
Alpha’s properties include Indata, where the company is drilling 5,000 meters right now with results expected to start coming in this fall; and the Okeover North Lake Zone, which has a historic resource of 86.8 million tonnes grading 0.31% copper and is located about 25 kilometers from a Pacific tidal port.
Indata, made up of 16 claims totaling more than 3,000 hectares in north-central British Columbia, is also close to Northwest Copper’s Kwanika and Stardust discoveries. Historical drilling includes 148 meters grading 0.20% Cu, including 24.1 meters grading 0.37% Cu, the company said.
Okeover is on the south coast of British Columbia, 145 kilometers northwest of Vancouver. It’s made up of 12 claims totaling more than 4,600 hectares. The company plans to start drilling there in 2023.
The purchase of CAVU nets Alpha the Star and Hopper projects in the Yukon.
Star is a multi-target copper-gold porphyry project in the Golden Triangle with 106.98 meters graded at 0.77% Cu in one hole. Over 13,000 meters of modern drilling have been completed there, and it is fully permitted for 200 drill sites until 2026.
Copper demand is expected to rise 16% and outstrip supply by more than 6 million tonnes by the end of the decade, according to independent energy research company Rystad Energy.
Hopper is a 74-kilometer multi-target porphyry copper-molybdenum project in the Yukon with “significant copper-gold-silver peripheral skarn mineralization,” Alpha said. The best intercept there has been 22.28 meters at 1.405% Cu.
“I think we've just got an embarrassment of riches for the shareholders here for what we believe is a steal,” Jones said.
For the purchase, Alpha proposes issuing 0.7 Alpha shares for each CAVU share. CAVU shares would be valued at about CA$0.33 each, a premium of about 31.3% for CAVU shareholders.
Upon completion of the transaction, CAVU shareholders will hold about 30% of Alpha shares on an outstanding basis. It requires approval by CAVU shareholders and the Canadian Securities Exchange.
Copper Is Driving Green Economy
The red metal is helping drive the new green economy. Copper conducts heat and electricity and is a vital part of the move toward clean energy. EVs use three times as much of it as combustion engine cars do, and solar panels require it, as well.
Demand is expected to rise 16% and outstrip supply by more than 6 million tonnes by the end of the decade, according to independent energy research company Rystad Energy.
New uses are popping up all the time, including in the biomedical industry, where copper’s antibacterial properties are prized.
“The increased demand for copper as a result of the burgeoning EV and green economy will provide a compelling catalyst for majors to replenish and grow their copper pipeline over the mid-to-long-term,” Combaluzier wrote before CAVU’s sale to Alpha was announced.
The U.S. Geological Survey estimates there are 3.5 billion metric tons of copper on the planet. “However, only a fraction of this geologic resource is economically viable at present-day prices and using current technologies,” the S&P report said.
Chile and Peru are the world’s top two producers, accounting for 38% of world production, and China accounted for over 40% of the refined copper produced globally, the report said.
It can take more than a decade to develop a new mine, so any needed growth in capacity will likely come from a combination of expanding existing mines and progress in opening mines currently under development.
Ownership and Share Structure
Top shareholders include Mango Research & Management Inc., which holds 2.69% or 1.3 million shares; the CEO Jones, who holds 1.66% or 800,000 shares, and Sean Charland, who owns 0.78% or 380,000 shares, according to Reuters.
The company has 52.02 million shares outstanding, 45.7 million of them free-floating, with a market of CA$17.95 million. It trades in a 52-week range of CA$1.09 and CA$0.18.
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