Source: Clive Maund 04/08/2024
Technical Analyst Clive Maund shares a deep dive into Freeport Resources Inc. to explain why he believes it is a Strong Buy, with huge upside potential.
This is a BIG story. If you are interested in the mining world, you will find this interesting. If you are interested in making BIG returns out of your investments, you will find this interesting. If you are interested in both, you ought to find it fascinating.
Freeport Resources Inc. (OTC: FEERF) is the 100% owner of the giant Yandera copper project in Papua New Guinea, and we should note here that once it's up and running, it will also be producing significant quantities of gold and molybdenum.
Yandera is a project of strategic national interest in PNG and has the potential to become one of the country's most significant copper mines. The reason that Freeport's stock is still so cheap is simple — the project was in limbo for the past two years, pending approval of the license, which has now been issued by PNG.
The objective of this report is to make it crystal clear to you why Freeport's stock has such a huge upside and, therefore, why it is such an outstanding investment here.
Freeport will be bought up by a much larger company eager to secure future supplies by getting its hands on Yandera. If this happens, as an investor, you will make big gains fast, but probably not as much as over the long-term if the company continues growing as an independent entity, but the point is that either way, as an investor, you win, and win BIG.
Let's start by "setting the stage."
We'll begin by pointing out that the Yandera copper project has already had $200 million spent on it, and while it can be said that some of this inevitably disappeared into a black hole and is "sunk money" a goodly part of it was used to ascertain the potential of the project, which is huge and the results of all this prior work are standing the company in good stead now.
Next, the company is intent on pressing ahead with the project — copper prices are set to soar and not as some short-term spike — they are going to go high and stay high, and this major copper bull market is starting right now.
Why are they set to soar?
Not just because of the general metals bull market that is now, at last, starting to gain traction but even more importantly because of an impending yawning gap between supply and demand, which is set to start to hit as early as next year.
Take a look at the following chart from the company's investor deck.
You will no doubt observe that in addition to the yawning supply / demand gap impacting from next year, the right-hand graph shows a massive ramp-up in M&A activity in the copper sector. What this means is that there is an increasing possibility that Freeport will be bought up by a much larger company eager to secure future supplies by getting its hands on Yandera. If this happens, as an investor, you will make big gains fast, but probably not as much as over the long-term if the company continues growing as an independent entity, but the point is that either way, as an investor, you win, and win BIG.
So why, you may ask, is there going to be such a copper supply deficit for the remaining years of this decade?
The answer is provided by the following chart, also from the company's Investor Deck, which shows that there have been virtually no major copper discoveries for nine years now, and before that, they were tailing off. It would seem that a combination of low metal prices and high capital inputs have deterred exploration, and as ever, this is a situation that will right itself through a massive copper price hike that will encourage much more active exploration and intensive utilization of existing sources.
This situation is compounded by the demand for copper undergoing unprecedented structural change driven by the global energy transition. Needless to say, a BIG runup in the price of copper will make the economics of developing the Yandera resource much more workable and encourage the partners that the company is actively looking for to be much more amenable to "stepping up to the plate."
This is a good point to add that although the capital cost of bringing Yandera to production is estimated at close to $1 billion, once up and running, this cost should be recouped in less than six years — less still if the price of copper continues to rise.
Speaking of the economics of the project, this is a good point to work in that "There have been a number of new breakthrough advances in low-cost, direct sulfide leaching technologies since the Yandera prefeasibility study was completed in 2017. These new technologies allow for direct sulfide leaching at the mine site to produce a final copper cathode product, thereby eliminating the need for a costly concentrator and its attendant operating and transportation costs.
The potential capital, operating, and transportation cost savings are significant and could further strengthen the project's economics and attractiveness to potential strategic partners" commented Gord Friesen, the chief executive officer of Freeport Resources. With respect to these breakthrough technologies and how they ...