Near Term Catalysts for Oroco

by | Jun 26, 2019 | General | 0 comments

This article was written by thereader on Stockhouse.

Oroco’s share price performance – it’s been one of the best performing juniors on the TSX-V over the past 24 months – has been driven by the an emerging understanding of the asset – a Tier One copper deposit – an awakening of the fundamentals of the copper market – a wave of demand and a vastly diminished pipeline of future projects, and, of course, the Oroco’s success in cleaning up legal title.

I think Oroco’s share price will continue its torrid pace of appreciation, aided by predictable events generated by the company, and forces from outside driving markets.

On the predictable side, I think there’ll be a sp jump when title to the concessions is registered to Xochipala Gold, and again when Oroco exercises its option to acquire Altamura Copper. The legal battle is won, the defendants ground to dust, and registration is just a matter of a bureaucratic process with the Public Bureau of Mines, but its completion will represent a manifestation and conclusion of the recent legal victories, and will no doubt comfort some investors.

The execution of the Altamura option will do the same.

The next predictable events that will drive the sp are exploration and confirmation/definition of the resource. Past exploration left a clearly marked path to follow. Confirm those figures, expand in any of the several directions the deposit is open, and start to tick a well-defined group of boxes; compliant resource estimate, confirm historical metallurgy results, engineering, permitting progress, etc., and the value will increase.

In addition to that, a considerable and defining tail-wind will also be coming from outside forces.

The rise in gold is a sign of the falling confidence in the USD. Copper prices have also recently firmed up, at least partly as a result of a falling USD. This suggests that we are likely at an inflection point, much like 2001 and 2011, when major reversals in the dollar took place, with major implications for metal markets.

From 2001 until 2011 the USD dropped in value, and with each drop came a rise in dollar denominated assets, like copper. Copper rose during that period about 600%, from $0.65 to $4.50, and this coincided perfectly with the fall of the dollar. From 2011 until today copper has fallen as the dollar strengthened. 2019 will be remembered as the next inflection point for the dollar. Copper prices will rise as the dollar weakens.

That rise in copper prices will likley be strengthened by supply and demand fundamentals.

A falling dollar, a rise in value of $ denominated assets, copper supply shortfalls leading to even larger rises in copper prices, and a jump in values realized in copper M&A. The pace of acquisitions picked up last year, suggesting majors see his trend as well, and yesterday’s acquisition of MOD by Sandfire set a new high for a price paid for in-situ copper, about US $0.15 per pound, or about 45% of MOD’s project’s NPV.

Those are my big ideas. See you in a year, and I predict OCO’s share price will again see a 150% gain, just as it has over the past 12 months.

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About Mariusz Skonieczny

Mariusz Skonieczny is the founder of Classic Value Investors.