Gamble of the week: a play on copper

By Author Charlie Gibson Jan 25, 2006

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The rise in the copper price from its erstwhile long-term price of $1/lb to closer to $2/lb within the past five years has been great news for copper mining firms.

It has inflated their cash flows, but also made previously uneconomic ore bodies suddenly viable, something that in turn makes a few of the more speculative plays in the market worth betting on.

One to consider, says the Investors Chronicle, is African Copper (AIM:ACU, 66p). The company is on track to develop an open-cast mine on the oxide portion of its Dukwe copper project in Botswana. Tests to date indicate that Dukwe “could produce around 50 million lbs of copper each year”, generating sales of around $100m at current prices.

The latest estimate of the capital cost of a plant for processing both the oxide and sulphide ore is around £21m (or $37m) – half of which is already covered by the company’s cash reserves of around £12.5m.

There is still a long way to go before there are profits, but so far, so good, says the Investors Chronicle, which, along with stockbrokers Numis, rates the shares a buy.

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Published in Tips & advice | More articles by Charlie Gibson

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