Phoenix Copper: Copper prices go up as renewables' demand rises

The price of copper came closer to a value of $7,000 per tonne at the London Metal Exchange (LME) on 21 October 2020 as the market seemed optimistic with the new driver of renewable energy. LME is the global center for trading in industrial metals. Copper contracts have been trading on this exchange ever since 1877, the year of its inception.

The clean energy revolution seems to have been triggered by the coronavirus pandemic. This has led to a rise in demand for copper from the renewable power domain, which is pushing up its prices.

The price of copper rose sharply from $4,900/t in March to more than $6,600/t by the end of September 2020.

Copper is used widely across industries from electricity production & distribution to even iPhones. Due to its broad application base, the variations in this metal’s prices are seen as a barometer of the global economy’s health. Therefore, the steady rise in copper prices over the past seven months or so is suggestive of a global economic recovery, according to market experts.

Few reasons why investors are taking a closer look at copper are a favourable demand-supply scenario, increasing prices, and fast-paced development activities at copper mines recently.

The changing energy mix away from non-renewables is positive for metals like copper that are used extensively in electrical wirings. Copper prospects are positive throughout the world. For instance, China is soon coming out with its renewable infrastructure policy in its latest five-year plan.

UK renewables outlook

Market experts point out that the growing renewables sector has the potential to speed up the economic activity in the nation and quickly take it out from the recession it is undergoing at the present time.

As per a latest report from the London School of Economics, the UK has to build upon six main areas to achieve the target of zero greenhouse gas emissions by the year 2050. These are investing in natural capital plans, raising energy efficiency of buildings, investment in infrastructure, higher electricity production and distribution through renewables, and improved carbon utilisation.

Moreover, new jobs can be generated in a struggling British economy with a rapidly rising unemployment rate through investment in the renewable energy space, highlighted the London School’s report. For instance, a large number of people would need to be hired for constructing infrastructure and producing travel equipment, tree plantation, raising energy efficiency of homes and offices, and for restoration of wetlands.

Apart from generating green jobs, the clean energy can ensure energy security of the nation and help achieve its sustainable development goals.

In fact, experts indicate that not just in the UK, but the global recovery itself should be targeted towards a greener and more equitable future.

Let us now take a closer look at performance of Phoenix Copper Limited (LON:PXC), the mining company based out of Idaho, North America.

New high-grade finds

According to the company, its reserves for copper sum up to a value of nearly 0.13 million tonnes. Phoenix is also into mining gold, silver, and zinc.  The company has historically been mining high grade copper at Empire mine in Idaho, US. Currently the company is exploring more high-grade copper reserves at a 5.4 kilometer stretch at the Empire mine, which holds an early cash flow potential.

Ryan McDermott, CEO Phoenix Copper said that the company has recently got analytical results from its 9 reverse calculation holes and 2 HQ diametrical holes at the gold zone of the Empire mine.

The copper reserves found are of remarkably high-grade, which is impressive, he emphasised. The depth of these mines is relatively shallow, making them easily approachable through open pit mining methodology, added McDermott.

Phoenix Copper Resources at the Empire Mine, May 2020

(Source: Company presentation)

Financials

For the six-month period ending 30 June 2020, the company had raised capital worth close to $4 million. Its investment in the Empire mine was up by nearly $13 million and its net assets rose by around $14 million.

The open pit mineral resources for copper were up by 11 percent on 30 June 2020 as compared to the same day in the previous year. The base line environmental studies were completed for open pit and Red Star mines. This was likely to speed up further work permissions and mine planning at the copper-oxide open pits.

The company was exploring different extraction methods for faster recovery of copper from the plant. It was also developing its pilot metallurgy testing plan.

Phoenix was following health safety guidelines at its mines to ensure proper employee and community safety in a coronavirus pandemic scenario.

Stock performance

Phoenix Copper Limited is listed on the AIM index of the London Stock Exchange. The company’s stock (LON:PXC) has been performing very well for the past few months, especially since mid of April 2020. It was trading at a value of GBX 5.75 on 17 April and has multiplied many-folds to touch a value of GBX 47 on 21 October 2020. The stock had touched this year’s peak on 15 September with a value of GBX 53.50.

On 21 October, it delivered a strong year to date return of 347.62 with a market capitalisation value of £ 29.69 million.