Big Tree listing to offer pure copper exposure

Fresh from buying the O’Okiep Copper Company, Big Tree Copper plans to list in SA, bringing a pure copper play in the Northern Cape to investors as it rolls out plans to become a green source of the sought-after metal.

Big Tree Copper has secured the backing of a large SA investment fund, which made its funding conditional on the company listing, said CEO Jan Nelson, the geologist who once headed JSEand LSE-listed gold miner Pan African Resources.

Big Tree Copper was until recently called Cape Copper Oxide Company. A companychanging deal for an unspecified sum of money and shares in the past few weeks secured it 30 years’ worth of dumps to process at the O’Okiep property, which includes buildings, surface resources, old mines and infrastructure.

“Our intention is to halve that 30 years to 15 years. We’ve got one plant we’re expanding and we’re going to build a second,” Nelson told Business Day.

The plan is to quickly move production to 500 tonnes a month by building the second plant, using R30m raised in the listing.

The property comes with all the environmental and other permits needed to start work on the land, which has been worked on an industrial level since 1937 when Newmont, then Gold Fields SA and finally Metorex operated mines there until the 1990s.

Big Tree’s first R64m copper plant will be commissioned in July, producing 100 tonnes of copper a month by September, building up to 160 tonnes by November, using a solvent-extraction electrowinning process Nelson describes as a first in SA.

The first plant can be easily

expanded to about 250 tonnes a month and the 10-month construction phase of the second plant of a similar size will start towards the end of 2021. The expansion and new plant will cost R85m, which will be paid for from cash and capital raised in the listing.

While the tonnages are not big and will not move the copper market, the profit margin will result in chunky rewards for shareholders, Nelson said.

The high-quality copper plates will be sold to Noble Metals, a buyer and processor of non-ferrous metals, at the mine gate, he said.

The listing in about three months will be on the ZAR X exchange. Nelson said the choice of ZAR X ahead of the JSE was because it was a cheaper and quicker way into a listing. Initially, there would be a small free float of shares available for investors.

Management and the board of Big Tree will own 40% of the company, the anchor shareholders 30%, and the big fund manager and other shareholders, who will come into the company on listing, will own the balance. The owner of O’Okiep will become a small shareholder and will receive cash for the transaction.

Big Tree has committed to paying out at least 30% of its operating profit as a dividend from the end of 2021, just six months after starting production, something Nelson does not see as insurmountable with the copper price hitting records above $10,000 a tonne.

The business will remain profitable even if copper falls as low a $2,800 a tonne.

“This is one of the few opportunities to have pure exposure to a listed copper company. We won’t be mining because we are just processing dumps, so we also come with strong green credentials of environmental rehabilitation, filling in old excavations in the area with our own tailings and restoring the area to natural vegetation,” he said.

One of the big projects will be to establish a large vegetable gardening scheme in Nababeep, able to feed 1,000 people a year. “We have a long list of projects. We will generate a lot of cash, but we can use our listing to raise money if we need it.”

With 70% of profit remaining in the company in the strong copper price environment, there will be enough cash for community programmes and additional work on site, he said.

The global copper market is forecast by Bank of America to record a deficit of 186,000 tonnes and double that the next year before moving into surplus.

World supply of copper is about 30-million tonnes a year. But the market is no longer in balance, with wage strikes pending in Chile at BHP’s Escondida and Spence mines, potential disruptions to supplies in Chile from a proposed increase in the royalty charge in the leading source of copper, as well as surging demand from China.

Forecasts for copper prices are in a range of $13,000$30,000 a tonne.