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| It’s happening: Big Auto is making the transition from gas-powered vehicles to electric vehicles.
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| The result will be a monumental shift in the supply chains that feed Big Auto’s production plants — including a massive increase in the amount of copper that assembly lines need for the motors that drive EVs.
And as the auto industry casts about for sources of copper, the Big 3 automakers in Michigan will find not one but two multi-billion-pound copper deposits literally in their backyard.
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| They are the Copperwood and White Pine North deposits, located in the state’s Upper Peninsula and owned, 100% and 34% respectively, by Highland Copper (HI.V; HDRSF.OTC).
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| Copperwood is one of very few fully permitted projects globally, at the construction decision phase and home to 3.7 billion pounds of copper (1.8 billion pound measured and indicated and 1.9 billion pounds inferred).
White Pine North is at the prefeasibility stage and is owned 66% by Kinterra, Highland’s joint venture partner on the project. On a 100% basis, White Pine North contains 5.4 billion pounds of copper (3.2 billion pounds measured and indicated and 2.2 billion pounds inferred).
As you’re about to see, these projects give Highland Copper extraordinary leverage to rising copper prices...and make it a name to look at closely when building a portfolio around the electrification theme.
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| Copperwood:
Ultra-Levered
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| Highland’s 100%-owned Copperwood project completed the feasibility stage just last year — and the projected economics show extreme sensitivity to the price of copper. The table below lays out those economics by $0.25 intervals in the future average price of copper, from the conservative $3.75/lb. to the very possible $5.00/lb.
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| The project’s net present value (“NPV)”, discounted at 8%, is $168 million for a base case price of $4.00/lb.
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| But if the price averages $5.00/lb. over the life of the project, that NPV, discounted at 8%, jumps 300% to $507 million!
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| Simply put, if you believe that copper prices are going to continue to be impacted by strong electrification demand and supply-side underinvestment, then the Copperwood project makes Highland Copper a highly levered way to bet on that trend.
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| …With Plenty Of Upside
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| Adding to the project’s allure are several value-creation opportunities that could boost its economics still further.
It starts with potentially converting Copperwood’s 79 million tonnes of inferred 1.09% copper into higher resource categories, thereby allowing those tonnes to be included in its feasibility projections..
Then there’s potential support from the state of Michigan itself.
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| Notably, the Michigan Economic Development Corporation has proposed a $50 million grant for the Copperwood project.
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| That grant has received its first stage of approval from the Michigan Strategic Fund and is now in review by the Michigan House and Senate Appropriations Committees.
The local community in the Upper Peninsula has been extremely supportive of the application for funding and a survey by Invest UP shows 82% support for mining in the region.
Combine this type of support with process improvements like plant optimizations, metallurgical recovery improvements and bulk ore sorting technology, and you have a project that could see its profitability significantly boosted in the months and years ahead.
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| White Pine North:
A Strong Joint Venture Deal
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| It’s important to remember that Copperwood isn’t the only multi-billion-pound deposit in Highland Copper’s portfolio.
The company also has a 34% stake in the nearby White Pine North project, with Kinterra owning the other 66%.
The deal with Kinterra on White Pine North was completed in 2023 and essentially funded both projects.
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| Highland received $30 million for 66% of White Pine North and an agreement by Kinterra to invest another $30 million developing the project.
Kinterra will also provide Highland with a $10 million unsecured loan that Highland can use to fund its pro rata share of development at White Pine North.
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| White Pine North is a strong project in its own right: Not only does it contain 5.7 billion pounds of copper, but a 2023 PEA put its after-tax NPV, discounted at 8%, at $821 million and its after-tax IRR at 20.8%.
White Pine North is at the prefeasibility stage and Kinterra will drive the project going forward, but Highland’s 34% stake in the project gives it powerful upside added to the compelling copper lever it has at Copperwood.
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| If You Like Copper...
You’ve Gotta Like Highland Copper
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| A huge global copper resource. Permits in hand at Copperwood. A location in Big Auto’s backyard. The support of the state of Michigan and the local Upper Peninsula community.
It all adds up to make Highland Copper a great strategic bet on the new copper bull market. And considering how quickly this copper market is now progressing, it’s a company that smart investors will begin their due diligence on immediately.
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