Introduction:
For a relative mining stock minnow, it can be said that Phoenix Copper (PXC), has generally punched above its weight in terms of market speculation, liquidity and profile. Indeed, this has even been since the company announced the long awaited subscription to its $80m copper bond in May. However, the market is seemingly missing out on recognising the massive high grades underground sulphides potential of the company at the Empire Open-Pit Mine. This could be accessed far sooner than is expected, and blending high grade ore with open pit ore would significantly improve the economics.
Copper Bond
If we were in a normal market shares of PXC would have rocketed on that announcement of copper bond funding in May from around 15p to say, three times that amount and stayed there. The rationale should have been that this funding (and the possibility of more) would see the AIM-quoted USA-focused base and precious metals company secure in terms of developing its projects, especially the Empire Open-Pit Mine, for which it released a Pre-Feasibility Study last week.
Tight-lipped
Once again, the shares should have climbed off the back of the PFS. But in a company with many moving parts, just addressing one issue seems to trigger a wave of fresh questions. This has led to a rather ridiculous state of affairs. There is a mix between the company having to hold its tongue for fear of anything which might light a fire under the share price – yes, it is that kind of market, and investors tying themselves in knots regarding what they are actually wishing for.
The latter is further complicated by PXC having an additional four assets, including Navarre Creek, Redcastle, Red Star Silver and Bighorn. But the reality is that none of the material value these assets are included in PXC’s paltry £30m market cap, and only a fraction of the sizzle at Empire is either. This is not only because PXC has been understandably coy in the wake of its NIU funding. It is also clearly mindful that litigious US investors may punish numbers and timeline predictions that subsequently prove to be wide of the mark.
PFS Economics
In fact, the result of all this coyness has actually been rather counterproductive, and is worthy trying to clear up. If only because under the surface PXC is one of the best prospects in its class. We are already aware of the “minimum” on offer: PFS pre-tax economics – discounted net present value at 7.5% of US$87.86m, 46.4% Internal Rate of Return, US$152.98m cumulative net free cashflow over an 8-year mine life. This is not shabby in its own right.
However, the market is assuming Q1 2026 on this production. It is not expecting a quicker turnaround from underground adits, accessing the ore body, underneath the Empire surface mine. This has the high grade copper – up to 8%, something which when blended with the typical 0.6% grade at surface, means that PXC could be selling to local offtakers as soon as the middle of next year. Of course, “killed by compliance” means that the PXC we know at the moment is effectively painting the worst picture.
All About The Sulphides
This could change with the forthcoming Chairman’s statement later this week, something which might be able to hint at the mining of sulphides of 6%-8% grades, the faster timeframe to initial production, and the high leverage to any further rise in the copper price. For instance, the current $153m free net cashflow could easily flip to double this or more. Also not in the mix is the prospect of M&A given what PXC is sitting on, as well as what it could shoot for with its new funding, and how little of it has been factored into the current market cap.
The NIU Announcement
But perhaps the best bull point with PXC remains that at 15p the shares are below what the were the day before the announcement of the subscription agreement with NIU Invest SE at 19.25p. This on its own is ridiculous, especially given the latest PFS news. While the market can quibble with regard to the amount of NIU drawdown, timing to production, grades and size of assets, all of this is well and truly backed into PXC at 15p.
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