The Canada-listed copper stocks we have identified look like potential M&A targets in a beaten-down copper market
SmallCapPower | November 6, 2018: The spot price of copper currently sits at US$2.76 a pound, down 20% from its year high of $3.30 a pound on June 8, 2018. The decline in copper prices have similarly depressed the value of copper assets, offering an opportunity for mining companies to make strategic acquisitions. On October 31, 2018, Hudbay Minerals (TSX:HBM) announced the acquisition of Mason Resources (TSX:MNR) for ~$31M, a premium of 110% based on the closing price of the previous day. Today, we have dug up three Canada-listed copper stocks that look like potential M&A targets for copper producers with strong balance sheets to take advantage of weakness in the copper price. Note: All metrics reflect closing prices as at November 2, 2018.
Amerigo Resources Ltd. (TSX:ARG) – $0.96
Copper
Amerigo Resources is engaged in the production of copper concentrates in Chile’s largest underground copper mine, the Codelco El Teniente mine. In 2018, Amerigo expects to produce between 65-70M lbs Cu annually at an average cost between $1.45 and $1.60 per pound. Once the Company completes its Phase Two expansion at Codelco, production is expected to increase to 85-90M lbs. In Q3/2018, the Company set new production record with 17.3M lbs of copper produced at a cost of $1.38/lb.
- Market Cap: $170.2 Million
- 1-Month Total Return: 18.5%
- 6-Month Total Return: -5.0%
- Return on Equity (LTM): 8.5%
Sama Resources Inc. (TSXV:SME) – $0.32
Diversified Mining – Copper
Sama Resources is a junior exploration company focused on the development of its Samapleu, Nickel-Copper project, located in the Ivory Coast of West Africa. The Samapleu project is a joint venture between the Company, the Ivory Coast Government and its state-owned mining company SODEMI. On October 23, 2018, the Company announced a 6,000-meter drilling program designed to test high-conductivity targets identified during the Phase 1 Typhoon electromagnetic geophysical survey. The objective of the drilling campaign is to identify reservoirs of high-grade nickel-copper-cobalt deposits.
- Market Cap: $61.2 Million
- 1-Month Total Return: 16.1%
- 6-Month Total Return: -17.7%
- Return on Equity (LTM): 50.9%
Excelsior Mining Corp. (TSX:MIN) – $0.98
Copper
Excelsior Mining explores and develops mineral assets in Canada and the United States. The Company’s primary asset is the Gunnison copper project that covers 9,560 acres in Cochise County, Arizona. On October 16, 2018, the Company announced that it had acquired all required operating permits from the United States government and can now begin production to a maximum capacity of 125 million pounds of copper cathode per year. To fund production at the Gunnison Copper Project the Company entered into an agreement with Triple Flag Mining Finance Bermuda Ltd to raise US$75 million, which is expected to close in November 2018.
- Market Cap: $203.5 Million
- 1-Month Total Return: 4.3%
- 6-Month Total Return: -31.0%
- Return on Equity (LTM): -54.8%
Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.
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