Celsius Resources Ltd (ASX:CLA, AIM:CLA) is advancing a portfolio of copper-dominant projects that, in production, would help support the continued electrification of global economies to reduce the emission of greenhouse gases, according to WH Ireland.
The broker believes Celsius is well-positioned to benefit from interrupted near- and mid-term copper supply, and strong copper prices.
Celsius is making steady progress in the Philippines and recently pointed to the Sagay Project application for Declaration of Mining Project Feasibility as a highlight for the quarter ended December 2023.
Read: Celsius Resources highlights Sagay project progress
WH Ireland sees fair value in Celsius at 4.6 GBP pence/share (8.8 A$ cents/share, based on current exchange rates).
The following is an extract from WH Ireland’s initiation report:
Celsius indicates that, subject to licensing and funding, both the MCB and Sagay copper projects could be brought into production within two years and selling copper concentrates to buoyant markets. Revenues from these projects could provide the funding to advance other projects in the portfolio. A Declaration of Mining Project Feasibility (DMPF) has been submitted to the Philippine authorities for Sagay, while MCB has an approved DMPF, and now awaits approval of its mining permit, which the company believes is imminent. Diversification of commodities and jurisdiction is provided via the Opuwo copper-cobalt project in Namibia – one of the largest undeveloped cobalt resources outside the Democratic Republic of Congo (DRC). We see fair value in Celsius at 4.6p/share (AU$8.8c/share, based on current exchange rates).
Clear pathway to production and revenue: The MCB Mining Project Feasibility Study (MPFS) and Sagay have set out mining cases, and have established potential routes to production. The agreement between Celsius and local partner Sodor Inc (Sodor) (ASX release 20.03.23) secured $43m of an estimated $255m initial capital to take MCB into production. The company has recently advised that it has several interested parties in providing the capital required to constructing the MCB Project subject to issuance of the mining permit. The MPFS for Sagay suggests that the capital cost required to deliver production is less than $15m.
Near-term cashflow and long-lived mine life: Subject to licensing and funding, we believe MCB could be in production by Q1 2026 – transforming Celsius from project developer to producer. Studies indicate that the current MCB resource could support mining operations over at least 25 years, and we believe that, with further drilling, this timeframe could increase further, considering the recent addition of the adjacent Botilao tenement. Previous drilling at Botilao generated positive results. The Sagay project offers further near-term production potential, and the MPFS is based on secondary copper mineralisation developed in shallow, weathered zones adjacent to a much larger porphyry system. Celsius has investigated the potential to recover this mineralisation via shallow-surface mining to produce a copper concentrate via simple processing techniques. Studies indicate that initial capital requirements to achieve production at Sagay is less than $15m. Any revenues generated by Sagay could, in our opinion, help fund the exploration of the adjacent and copper-gold porphyry, a potential second, large-scale project in the Celsius portfolio.
Accelerating copper demand: The Celsius portfolio is copper-focused, which we consider very positive, given accelerating copper demand. Our outlook is underpinned by interruptions to forecast near- and mid-term supply (i.e. Cobre Panamá, and many projects in Peru and Chile) and forecast growth in copper demand, driven by the electrification of the global economy. Our valuation is based on a long-term copper price of $8,800/t, compared with the ca.$8,275 at which it trades today. Copper prices above our long-term price would have a significant impact on our valuation of Celsius.
Value drivers: We recognise a number of potential near-term (pre-production) events that would lift our valuation of Celsius. As investigations continue and projects are optimised, risk is reduced, which will attribute more of the value of projects to Celsius. Resource growth, driven by further drilling, would also boost our valuation. WHI view: Celsius has a compelling portfolio of copper projects that offer, subject to funding, the potential to generate near-term revenues that could provide the platform to develop long-lived mining assets. With near-term, low-cost revenue potential, paired with growing copper demand and a lack of new near- and mid-term operations coming online, we believe Celsius is well-positioned to benefit from the next copper boom. We see fair value in Celsius at 4.6p/share (AU$8.8c/share).