Copper 360 is one of just a handful of new listings on the JSE, bucking the trend of delisting by many small-cap companies for various reasons including poor share liquidity. The group, the only pure copper player on the JSE, has built a hydrometallurgical plant that extracts the metal from oxide resources in Nababeep and surroundings in the Northern Cape. Other group operations include a number of copper sulphide projects in varying stages of consideration. Business Day caught up with CEO Jan Nelson to discuss the company’s vision and an plans.
It has been a little over two months month since Copper 360 listed on the JSE. It’s been a pretty volatile ride so far, with your shares shooting up to R20 after making their debut at about R5 before coming back R3.90. What is your overall sense of the market’s reception?
I think it has been very good, though the share price has been volatile. It shows that there is a lot of interest, which drove the share price through the trade trend. I think we all knew that wasn’t a sustainable level for where the company is now. In terms of the number of shares traded it shows that there is a lot of interest in the company. We are we are overjoyed by that.
Copper 360 is one of a handful of companies that has listed on the JSE in recent years, especially in the small-cap category where price discovery is arguably very limited because of poor liquidity. We have seen a string of companies in this particular segment of the market delist. What was the rationale for Copper 360 choosing this route? And why do you think it will benefit your shareholders?
We chose this route because we’ve got quite an ambitious growth plan and feel the JSE presents a very good platform to expose ourselves as the only pure copper play in SA. It gives us the platform to raise capital in the future. Obviously when juniors list they have a liquidity problem, but I think that if you want to list on the stock exchange and you’re a mining company who wants to see significant gains in the short term, then you’re in the wrong space.
This is a marathon, not a race, proper appreciation liquidity will come. If you do the right things on the ground in your business, this is what will happen. One does however have to be patient; mining doesn’t happen overnight, nor does value accretion. If companies and shareholders understand that then you create a sustainable path. We’ve done this before with previous companies that we’ve brought to the exchange and have grown. You only have a problem when you want to buy those short-term gains and don’t have long-term vision.
For the purposes of context, could you spell out the strategy for the company and perhaps the short- to medium-term targets you have set for yourselves?
The strategy of our companies is clear. We are an emerging copper giant but we want to create value. Our strategy is very specific in terms of a cluster mining model where we target small, high-grade deposits with a low capital-intensive requirement that produce great margins for our shareholders, along with good growth. It’s almost similar to a Lego plug-and-play model: we just build the blocks on top of each other. They create great value and that’s our clear model in the short term.
We are building another processing plant that will be completed before the end of the year. We are opening the Rietberg mine, which is probably one of the richest underground copper mines in Africa. After that, we plan to build on a number of possible open copper deposits that we have in the area. We’ve got more than 12 of these and three developed mines, with 60 prospects on our mining licence. We also have a business where we process already mined rocks through our plant, which we intend to expand. In the long term we’re building all these small blocks on a no-risk basis to create significant shareholder value.
Electricity supply constraints are a burning issue in SA. Do you have a plan to mitigate these risks in the Northern Cape?
Yes, we’ve developed a clear strategy in that regard. The first phase of our plan is to roll out about 2-3 megawatts of solar panels on our existing sites, which will feed into and have quite a big effect on our existing plant that is dependent on Eskom now. This will mitigate most of the load-shedding, especially over the next six months. Thereafter we plan to build a 10-15 megawatt solar plant, which we are looking at augmenting with wind power, so that we also have power at night. Solar is very good, but it’s very expensive when it comes to batteries. We’re in such a good place in terms of wind power in the Northern Cape, so if we get it right, it will significantly cut the cost of building the solar plant.
We will then have flexibility with the two renewable energy sources. That is our plan over the next two years, and I think it will put us in a position where load-shedding will have very little effect on the business. These moves are something a number of miners in SA are doing. It is definitely the right way to go. Eskom still provides segments of good power for the business but having alternatives is important.
What are the key areas of concern for you and how do you think the SA government could assist emerging miners given the industry’s capital intensive nature and the long lead times for projects?
SA has provided a good mining regulation framework and though there are some problems the country is still one of the best destinations for our business. Despite the Eskom problems, we still have some very good infrastructure. Having said that I think one thing the government could do is provide more tax cuts or greater tax cuts for juniors like us, which will accelerate growth and allow us to employ more people.
We’ve employed more than over 400 people in just eight months and intend to employ more. With lower taxes we can divert money to capital growth or programmes where we can grow more aggressively. Capital is always a problem when starting up and growing aggressively. When you become bigger, then you can pay the normal tax that bigger companies pay. If you can get a tax exemption for, let's say, the first five years of aggressive growth, which the government can track, that would be a great help to the industry.
What are the fundamentals of copper looking like at the moment? I know it is regarded one of the green metals of the future.
The fundamentals for copper in the medium and long term are very strong in terms of the great deficits that exist. The green economy is growing and in the short term copper is linked to the wellbeing of economies. There is some doubt about the position in the US and a little bit of a pullback in growth in China and that has put some pressure on the copper price.
We expect that to change in the new year. I think in the short term we are going to see a price of about $8,500 a ton. That will grow in the medium to long term due to the fundamentals of a lack of supply and increased demand.
• This article has been edited for brevity and clarity.
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