Only 5 weeks ago, copper prices hit a new 4 1/2 year high of $3.3135 per lb. In recent weeks, copper has experienced its most dramatic short-term correction in history, declining by 18% to a 1 year low this morning of $2.716 per lb.
Copper's current 14-day relative strength index (RSI) has fallen to an extremely oversold level of 27.32. Over the last 31 months, copper's RSI has declined to a level of 35 or lower on nine previous occasions. On all nine occasions, the price of copper bounced big in the weeks that followed!
Copper appears to have double bottomed this morning at $2.716 per lb and has already bounced by $0.0629 or 2.32% to a current price of $2.7789 per lb!
Over the past month, the price of copper has followed the Shanghai Stock Exchange almost exactly. Both copper and the Shanghai Stock Index are now down by 16% year-to-date in 2018. Trade War fears have caused investors to bet against Chinese stocks and with China being the largest consumer of copper, investors have rushed to sell copper futures short.
In the event that current trade tensions between the U.S. and China escalate, it will be much easier for China to find other consumers for its goods than it will be for the U.S. to rebuild a manufacturing base capable of producing the goods that it imports from China. President Trump knows what a disaster it would be for his administration if store shelves at Wal-Mart become empty. Trade war fears are currently at a peak and copper prices will rapidly rebound in the weeks ahead as these concerns go away.
A real life trade war would actually result in massive U.S. price inflation and a collapsing U.S. dollar as China dumps its U.S. Treasuries at the same time that U.S. budget deficits soar to record highs. A worst case scenario trade war would actually result in the price of copper exploding, but for a totally different reason!
Many copper stocks already bottomed weeks ago and some are getting ready to soar from their current lows, where they have built unbelievably solid bases. NIA is excited to officially announce its suggestion of Kutcho Copper (TSXV: KC) the copper explorer that it believes is best leveraged to make the largest gains as copper prices continue to bounce higher. KC has little/no downside risk even in the unlikely event that copper dips further.
Most small-cap copper stocks are lucky if they have an inferred copper resource, but KC already has a large probable copper reserve. KC's 17,060 hectare Kutcho Copper Project is located in northern British Columbia, Canada and has a probable mineral reserve of 10.441 million tons with extremely high grades of 2.01% copper, 3.19% zinc, 34.6 g/t silver, and 0.37 g/t gold - for a total copper equivalent grade of 2.92%!
This gives KC a probable in-ground copper reserve of 463 million lbs worth $1.2895 BILLION at current copper prices! KC's probable in-ground zinc reserve equals 734 million lbs worth $858.78 MILLION at current zinc prices! KC's probable in-ground silver reserve equals 11.6 million oz worth $185.6 MILLION at current silver prices! KC's probable in-ground gold reserve equals 120,000 oz worth $149.4 MILLION at current gold prices!
KC's probable in-ground mineral reserve of base/precious metals has a total combined value of $2.483 BILLION at current metals prices!
KC's Kutcho Copper Project is very low risk because it has the financial backing of Wheaton Precious Metals (WPM) a $10.5 BILLION market cap precious metals streaming royalty company! WPM has already agreed to fund KC with a total of $100 MILLION to bring the Kutcho Copper Project into production!
Although all stocks are risky and there are no sure things in the stock market, NIA considers KC at its current price of $0.43 per share to be the closest thing to a sure thing in the market today! KC raised $14.624 MILLION in a December private placement that was priced at $0.65 per share! The 22.5 million shares that KC sold at $0.65 per share in December account for a large portion of KC's total shares outstanding of 47.77 million! KC's current market cap at $0.43 is only $20.54 million!
KC currently has $18.7 million in friendly long-term debt that it borrowed from WPM in December 2017, with initial interest payments being deferred for 24 months. In return for WPM providing KC with the friendly financing it needs to bring the Kutcho Copper Project into production, KC will be allowing WPM to purchase all of the silver and gold produced from the mine at a discounted price equal to 20% of the spot price. KC will receive full market value for the copper and zinc it produces, which will account for 86.52% of its total production value!
In April 2018, KC received the first of two $3.5 million advance payments from WPM that will be credited towards its future purchases of KC's silver and gold production. KC will receive the second $3.5 million advance payment from WPM next month. KC is using its $7 million in advance payments from WPM to fund the completion of its Feasibility Study. KC has hired Ausenco Engineering Canada Inc. to prepare its Feasibility Study, which is expected to be complete by summer 2019.
With a current cash position of approximately $5 million, KC's current enterprise value at $0.43 per share is only $34.24 million! KC's current valuation is what we normally see for copper explorers with an inferred resource that is working towards releasing a pre-feasibility study. By the time a copper explorer reports a large, high grade, proven/probable reserve and begins working on its feasibility study - its market cap and enterprise value usually exceed $100 million and often exceed $200 million.
If we conservatively value KC with an enterprise value equal to just 1/20th or 5% of the in-ground value of its proven/probable reserve, KC would trade with an enterprise value of $124.15 million and market cap of $110.45 million, which divided by KC's 47.77 million shares outstanding would give KC a share price of $2.31!
When KC hits $2.31 per share it will be equal to a gain of 437.21% from NIA's official KC suggestion price of $0.43 per share (at the time we sent this alert)!
KC initially began trading on December 21, 2017 at $0.52 per share and quickly became the #1 hottest copper play in the market by doubling within six trading days to a high of $1.04 per share! On June 26, 2018, KC bottomed at a record low of $0.405 per share.
During the first week of 2018 when KC exploded to a high of $1.04 per share it traded huge volume of 4,155,100 shares. Since bottoming on June 26, 2018 at $0.405 per share, KC has traded only 170,200 shares in two weeks. We see almost zero resistance below $0.65 per share where KC rasied $14.624 million in December. It won't take much volume for KC to return to $0.65 per share. Look for KC to return to $0.65 per share within days followed by a breakout to new record highs later this year!
Past performance is not an indicator of future returns. NIA is not an investment advisor and does not provide investment advice. Always do your own research and make your own investment decisions. This message is not a solicitation or recommendation to buy, sell, or hold securities. NIA has received compensation from KC of $40,000 cash for an investor relations contract. Never make investment decisions based on anything NIA says. This message is meant for informational and educational purposes only and does not provide investment advice.
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