The African Copperbelts

By Tshepo Magagane

Sometimes it is so difficult to really convey the opportunity at hand! The average project can generate an EBITDA margin of cUSD5,000/t (DRC will be higher given the higher grades). Now this about when Copper prices start to move – it is just dropping to the bottom line!

I have the attached graphs but they are so difficult for non-specialist investors to truly internalise!!

BHP calls is the “fly-up scenario” – prices disconnect from the cost curve – we saw it with Iron ore – now imagine what that of cash printing you will have if you are sitting on Copperbelts projects that can easily turn CF at current spot, if you are to take a haircut to spot (recently had to ask the owners of this project “is that cathode cost incl mining costs” – the cost level is that ridiculous)!

Fly up scenario = slap an additional USD5,000/t or USD10,000/t or whatever; which goes to the bottom line directly – we saw it with Iron Ore – Australians and Brazilians had a cost structure of USD20/t (South Africa about USD30/t) and prices started to fly to well over USD200/t (also way above Chinese low grade cost structure of around USD60/t)…

…you want to be positioned for that – same as some smart investors did with Thor Explorations / West African in the gold sector – they can produce at about USD1,000/oz – so current pricing drop directly down to the bottom line (see Thor confidently going “we are paying the last tranche of the PF” or WAfrican trading at Net Cash level)!