The supply challenge in copper was neatly summarised by S & P Global recently with its call that global decarbonisation through electrification meant copper demand would grow from 25Mt to 50Mt by 2035.

Supplying the additional copper is a seemingly impossible task. After all, it would take another 25 Escondida-sized mines, or another 125 Olympic Dam-sized mines, to cover the increase.

The solution lies in incentive pricing to bring forward new developments. As it is, copper has just nudged back over $US4/lb. Historically at least, it is an elevated price.

But it won’t be enough to bring forward the mine developments required to cover the coming wave of demand.

All that means there has never been a better time to be bring forward new mine supplies, particularly those with 2025-onwards first production timelines when copper’s supply challenge is expected to bite in a serious way.

Copper junior Coda (COD) has positioned itself to do just that from its Elizabeth Creek copper-cobalt project in South Australia’s copper-rich Olympic Dam province.

It has just released a scoping study into the project becoming an annual producer of 25,000t of copper and 1,000t of cobalt at an all-in sustaining cost of $US2.72/lb copper equivalent, based on a copper price assumption of $US4/lb, and assuming an initial 14 year mine life.

For reasons best known to the sellers of the stock (remembering for every seller there was a buyer), Coda shares were sent 24% lower in Thursday’s market. The 6.5c share price fall to 20.5c reduced Coda’s market cap to all of $30m.

Clearly there was some indigestion around the thought that what was a $40m company is positioning itself to a stage one capex spend of $277m, followed up by a stage two spend of $320m (partly funded by stage one cashflows, making for peak negative cash flow of $438m).

It also seems clear the buyers of the stock – in the face of the selling – were more focussed on the IRR (pre-tax) of 26.5%, the capital payback period of 4.75 years on a minimum 14-year project and the NPV estimate pre-tax of $570m.

They would also have scanned a sensitivity chart included in the scoping study. A 20% increase in the copper price bumps the NPV pre-tax figure to about $1 billion. It didn’t include the impact of a 30% or 40% copper price increase.

Such an outcome in copper prices come circa 2025 would not surprise. There is no other way for the global supply challenge to be met.

Coda has a webinar on today (Friday) at 8.30am WST, hosted by chief executive Chris Stevens. Should be interesting.

GOLD:

Gold stocks have taken on yo-yo qualities in response to the daily gyrations in the gold price. So the ASX gold sector has been one for the brave alone.

But now the US Fed has signalled that the era of aggressive interest rate hikes is over, relative calm should return to gold and gold equities.

The good news is that what volatility there has been, has been mainly to the upside, with the gold price putting on some $US140/oz, or 7.7%, in the past 30 days, enabling gold stocks to do something they haven’t done for 18 months – outperform the lithium stocks.

It begs the question of whether there is upside in the gold stocks from here on. Consensus is that there is, whether gold merely consolidates around current levels or makes a dash to the all-time (nominal) high of $US2,077/oz in March last year.

Consolidation around Thursday’s $US1,976/oz would give reason for the meek and mild investors in gold equities to step back in. And should gold take off to more than $US2,000/oz, there will be a pile on.

That’s because the run up in the gold price has yet to be fully reflected in gold equity share prices, particularly with the Aussie dollar gold price knocking on the door of $3,000.

All that comes through in Macquarie’s latest Aussie gold equities update. It has 16 stocks in its gold coverage. Based on gold prices for the next few years below the current spot, Macquarie set share price targets for the 16.

Ten of the share price targets were 20% higher than current share prices. Leading the pack was West African Resources (WAF) with an implied 76% upside, Regis (RRL) with 68% upside, and Bellevue (BGL) and Silverlake (SLR), both with 47% upside.

None of the share price targets on Macquarie’s universe of 16 were below current market prices. Those that came close though were Evolution (EVN) with 1% implied upside, Capricorn (CMM) at 3% upside, and  Resolute (RSG) at 4% upside.

MINCOR:

Andrew Forrest’s Tattarang said in its bidder statement that it had excess funds on hand to cover the $611 million cost of its bid for the 80.1% of Kambalda nickel producer Mincor it does not already own.

Given Mincor shares have raced well ahead of the $1.40 a share hostile bid, Tattarang will have to tap into those excess funds to make its on-market bid more palatable.

Mincor closed on Thursday at $1.54, with a rush of blood earlier in the day taking the stock to a high as $1.67.

A couple of things are at play.

First up, the market is clearly saying that the $1.40 a share offer, which was at 35% premium, is opportunistic as Mincor is only now getting into its groove at its restarted Kambalda operations.

Then there is the expectation that it makes more sense for either BHP, which buys concentrates from Mincor, or IGO, which is a 7% cent shareholder, to own Mincor than it does for Tattarang. So money is being put down that there will be a counter bid.

Whether that eventuates remains to be seen. Mincor shareholders should be thanking Tattarang for the share price lift that came from the $1.40 bid, no doubt. But it does not mean that they need to roll over at that price.

And they clearly have no intention of doing so. In the meantime, there has been a nice rub-off affect on the other nickel stocks.

Forrest had a shoot-out last year with BHP for the Canadian nickel developer Noront and won the day. Now he has his sights on Mincor. In the interim, IGO paid more than $1 billion for Western Areas last year.

Maybe there is something to the notion that while nickel supplies are currently in surplus, shortages are around the corner. Maybe billionaires and big mining companies know something the rest of us don’t.