Copper prices are on the rise and many investors are seeking out new opportunities, but recent nationalizations and near-nationalizations of mines have kept focus on the U.S. In this article, we’ll take a look at some opportunities in the U.S. copper space, including one junior company with significant potential in southeast Arizona next to an existing major mining firm.
Copper Prices on the Rise
Copper prices have steadily risen since November 2012, from about $3.45 per pound to more than $3.70 per pound. The lack of new copper mines coming into production and increasing worldwide demand should ensure these trends continue through the end of the year, according to Morgan Stanley analysts, who are calling for prices to rise 7.6% in 2013 to $3.88 per pound.
Jim Bob Moffett, chairman of Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX), recently noted in remarks to the press that copper prices look poised to rise over the long-term, with few new projects being developed. He attributes these trends to many companies abandoning plans for new copper mines because of how quickly commodity prices have risen.
With these dynamics in place, investors are seeking out both copper producers like Freeport-McMoRan or Inmet Mining Corp (OTCQB:IEMMF) and juniors like Liberty Star Uranium & Metals Corp. (LBSR) or Silver Bull Resources Inc. (NYSEAMEX:SVBL). The junior miners could see more potential upside, but at a greater risk for investors.
U.S. Plays Seen as Safer
There have been fireworks at Bolivia’s Colquiri mine recently – and that’s not figuratively speaking. In June, the country’s government revoked Glencore International plc’s (LON:GLEN) mining license in a labor dispute that sparked violent protests between salaried workers and independent co-operative miners fighting for control of the mine.
Meanwhile, South Africa, the world’s largest producer of platinum and chrome, only recently rejected proposals to nationalize mines outright in favor of higher taxes and royalties on operators, calming markets that were growing increasingly concerned. These nationalization concerns are only growing in many important mining markets around the world.
Many investors are therefore sticking with U.S. plays when it comes to mining, since they offer greater stability and less geopolitical risk. Companies like Liberty Star Uranium & Metals Corp. (LBSR) that mine exclusively in the U.S. may offer the best opportunities, since they have none of this international exposure and operate within developed legal frameworks.
Large Potential Copper Reserves
Liberty Star Uranium & Metals Corp’s (LBSR) Tombstone property in southeast Arizona is located near some of the most prolific porphyry copper mineral centers in the world. Chief Geologist and CEO James Briscoe has significant experience in the region and acquired the property on the premise that erroneous earlier work underestimated the region’s potential.
Over the past couple of years, the company engaged SRK Consulting to prepare an NI 43-101 technical report over three areas within the Tombstone Super Project (TSP), including Hay Mountain, Tombstone South and Walnut Creek. These reports confirmed the claims were worthy of further exploration and additional technical work is now underway.
Perhaps most significantly, in 2007, Freeport-McMoRan purchased Phelps Dodge Mining in a $25.9 billion cash and stock transaction that resulted in the acquisition of the Morenci open-pit copper mine in southeast Arizona just 50 miles northeast of Safford. That mine is projected to produce some 225 million pounds of copper when enhancements are complete.
Given this proximity, Liberty Star’s TSP could see significant potential of its own. In late 2011, the company completed an extensive geochemical survey and reviewed previously gathered data. And in July 2012, Briscoe and his team confirmed the Tombstone caldera’s size and location, which could pave the way for some near-term drilling targets.
Great Opportunity for Investors
Liberty Star represents a great opportunity for investors at its current levels, with a market capitalization of just $10 million. Successful data from upcoming ZTEM aerial reconnaissance and preliminary drilling could confirm the presence of a significant porphyry copper deposit that could become on of the largest in the region and provide a strong catalyst for investors.
For more information about Liberty Star, please see the following: