As the Dollar Dies, COPPER Flies - 'I'm VERY Bullish': Guy Le Bel

Key Concepts

• Copper Market Dynamics
• Long-term Fundamentals vs. Short-term Volatility
• Demand Drivers: Demographics, Electrification, Decarbonization, AI
• Supply Constraints: Declining Ore Grades, Discovery Rates, Permitting, Geopolitical Risk, Capital Allocation
• 29 Metal Corp. Assets: Opamisca and Theiri Projects
• Opamisca Project: Pre-feasibility Study (PFS), Low CAPEX, High IRR, Long Mine Life, Social License
• Theiri Project: Largest Primary Copper Resource in Ontario, Potential for Open Pit, Grade Increase with Depth
• Company Valuation and Investor Appeal

Copper Market Overview and Price Action

The discussion begins by addressing the recent volatility in the copper market, exemplified by a surge to nearly $6 per pound following a US tariff announcement, followed by a collapse to around $4.50, and a subsequent rebound above $5. Guy Leel, CEO of 29 Metal Corps, emphasizes the importance of focusing on long-term fundamentals rather than short-term price fluctuations, stating, "Everything short term is noise." He believes the market is currently experiencing a long-term bull cycle for copper and many other metals.

Long-Term Copper Demand Drivers

Leel outlines several key drivers for sustained copper demand over the next six years and beyond:

• Demographics and Societal Benefits: An increasing global population gaining access to societal benefits, such as electricity, inherently drives demand. Copper is essential for electrical infrastructure, with Leel estimating an embedded growth of demand of approximately 2% per year based on this factor alone.
• Electrification and Decarbonization: The ongoing transition to electric vehicles (EVs) and the broader decarbonization of society are significant demand boosters. While the initial "S-curve" expectation for EV adoption has flattened somewhat, with penetration rates not as high as anticipated five years ago in North America, this trend still contributes to increased copper consumption.
• Artificial Intelligence (AI) and New Technologies: The rise of AI and new chip technologies presents another potential "S-curve" of demand, though its exact trajectory remains uncertain. Leel acknowledges the difficulty in predicting this precisely but confirms the existence of this demand growth.
• US Dollar Debasement: A potential trend of US dollar debasement would also lead to an increase in the price of hard assets like copper, gold, and real estate, simply due to the currency's diminishing value.

Leel draws a parallel to the early 2000s to 2010s when China's electrification led to a significant demand surge, expecting a similar, albeit potentially tapering, effect for copper over the next decade. He anticipates that supply will eventually respond to price incentives, likely around $5 per pound.

Copper Supply Side Challenges

Leel highlights several critical issues constraining copper supply:

• Declining Ore Grades: The average grade of operating mines has significantly decreased. In 1970, the global average was 1.1% copper, projected to fall to around 0.56% by 2030, representing a nearly 50% reduction over 60 years.
• Reduced Discovery Rates: Copper discoveries in the past decade have been lower than in the preceding decade, despite equivalent or increased exploration spending. Discoveries are also becoming deeper, requiring more time and resources to bring into production.
• Permitting Issues: Permitting processes in the US and Canada can be lengthy, with instances of applications remaining stagnant for extended periods. Leel notes that while there's talk of streamlining for strategic projects, historically, permitting could take six to ten years.
• Geopolitical Risk: Operating mines in politically stable jurisdictions like Canada offers a significant advantage over countries with higher geopolitical risk, where ownership can be uncertain.
• Capacity to Build: The ability to develop new mines is segmented:
  • Giant/Diversified Companies: These companies allocate capital based on internal rates of return, and copper projects may compete with other commodities like coal or iron ore, potentially not always being the highest priority.
  • Intermediate Companies: These companies, focused on copper or smaller diversified operations, can typically manage one project at a time, but these projects still require billions of dollars.
  • Junior Companies: For junior companies with market caps under $100 million and projects costing over $1 billion, securing the necessary equity financing (multiple times their market cap) to fund development leads to significant delays in bringing projects to production.

Leel concludes that these factors are constraining supply, and he doesn't foresee significant changes in the short term.

29 Metal Corp. Overview

29 Metal Corp. is advancing two significant Canadian copper projects: Opamisca and Theiri.

• Company Structure: The company is part of the OR Group, an umbrella of eight companies that share back-office functions and physical offices, allowing for cost efficiencies and a higher ratio of funds spent on the ground.
• Funding: 29 Metal Corp. is fully funded for the next 12 months for its planned activities.
• Project Advantages: Both projects are brownfield sites with excellent existing infrastructure, including nearby communities, airports, rail links, and power, leading to lower capital expenditure (CAPEX) for construction.

Opamisca Project Details

The Opamisca project recently released a Pre-Feasibility Study (PFS) with promising results:

• Financials: The PFS was based on copper prices of $4.35, gold at $3,000, and silver at $30. Copper and precious metals contribute roughly two-thirds and one-third of revenue, respectively.
• Key Metrics:
  • Internal Rate of Return (IRR): Over 27% at base prices.
  • Net Present Value (NPV) at 8% discount rate: $500 million.
  • Payback Period: Approximately 2.25 years for a capital investment of $614-620 million CAD.
  • Mine Life: 17 years.
• Resource Utilization: The PFS utilizes only 50% of the declared resources from June, indicating significant potential for expansion.
• Cost Efficiency: Leel states that once capital is paid back, the operation becomes a "margin game," with costs around $1 USD per pound of copper net of byproducts for the first six years, due to mining a grade 50% higher than the average resource grade. This places it in the "first quartile" of production costs.
• Next Steps: The company plans to advance Opamisca to a Pre-Feasibility stage (PFS), which involves defining the project, conducting trade-off studies, and testing good ideas. This will require supporting studies for engineers to perform meaningful comparisons.
• Technical Aspects: Opamisca is a brownfield project, returning to a mine that operated for 45 years. The current plan focuses on two of the four historical underground mines, converting them to an open pit operation. The ore is described as geologically straightforward, with no "nasties" in the mineralization and clean concentrates.
• Mineralization Types:
  • High-Grade: Over 1.1% copper equivalent.
  • Stockwork: 0.40% copper equivalent, surrounding the high-grade zones.
  • The split between these types is approximately 50/50.
• Mining Strategy: The plan is to schedule ore to the mill on a decreasing grade basis, front-ending high-grade material to maximize early cash flow and payback, followed by lower grades as the mine life progresses.
• Social Aspect: The mine is adjacent to the town of Chappelle, and the community is supportive, viewing it as a generational project that will bring significant revenue and approximately 450 direct jobs to a town of 1400 people.

Theiri Project Details

The Theiri project is described as "the best kept secret in Ontario" and holds the largest primary copper resource in the province.

• Historical Context: The mine was operated by UMX Union of Belgium from 1976 to 1982 as an underground project. This period was challenging due to the second oil shock and high interest rates. The underground development alone is estimated to have a replacement cost of $200 million today.
• Current Focus: The primary target is an outcrop of mineralization located 3 km away from the historical underground workings, on the same mineralized horizon. This outcrop is 1.4 km long, dips at 55 degrees, and varies in thickness from 100 to over 300 meters.
• Historical Resource: In 2012, a junior company published a resource statement for the first 200 meters below surface for this zone, declaring 53 million tons of 0.38% copper plus nickel and PGs.
• New Discoveries: Upon re-compiling historical data, the company discovered that the grade at the outcrop (K1) increases with depth. This gradient suggests potential for higher-grade mineralization at deeper levels.
• Future Plans: The company plans to conduct drilling in the first half of the next year to prove this concept by drilling deeper holes (up to 600 meters) in several sections. If successful, they will proceed with more extensive drilling (70-meter centers) along the 1.4 km strike length and 600 meters depth to declare a resource. A Preliminary Economic Assessment (PEA) could follow quickly thereafter.
• Exploration Potential: The mineralized trend on the property can be followed with geophysics, suggesting other areas for future testing. Leel believes Theiri could be as significant as Opamisca within 18 months, and its value is not currently reflected in the stock price.

Company Team and Valuation

• Guy Leel's Background: Leel is a mining engineer with 40 years of experience, having worked at the Opamisca mine as a student in 1979. He was semi-retired before taking on the CEO role, drawn back to Quebec and the opportunity to work at a familiar site.
• Team Dedication: The team is small but dedicated, with geologists born and raised in the Chappelle area. The Chairman, Steven Stewart, leads the OR Group and provides broad support.
• Undervalued Stock: Leel openly states that he believes his stock is "highly undervalued." He encourages potential investors to visit the company website to review the material and compare 29 Metal Corp. to similar companies with PFS studies demonstrating high profitability, quick payback, and low costs. His primary focus is on upgrading the company's valuation to market comparables.

Conclusion

The discussion with Guy Leel, CEO of 29 Metal Corps, provides a comprehensive outlook on the copper market and the company's strategic position. Leel emphasizes the long-term bullish fundamentals for copper, driven by demographic growth, electrification, decarbonization, and emerging technologies, while acknowledging the short-term price volatility as noise. He details significant supply-side constraints, including declining ore grades, reduced discovery rates, permitting challenges, and geopolitical risks, which are expected to support higher prices.

29 Metal Corp. is well-positioned with its Opamisca and Theiri projects. Opamisca, with its recently released PFS, demonstrates strong economics, including a high IRR, significant NPV, and a rapid payback period, all supported by excellent infrastructure and community backing. Theiri, holding the largest primary copper resource in Ontario, presents a compelling opportunity for open-pit development with evidence of increasing grades at depth, requiring further drilling to unlock its full potential. Leel firmly believes the company's stock is undervalued, highlighting the low production costs and strong project economics as key investment attractions. His focus is on driving shareholder value by achieving market-comparable valuations for the company's assets.