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SA’s new mining pure-play Big Tree Copper confident IPO will fund expansion drive

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Jan Nelson, CEO, Big Tree Copper

NORTHERN Cape copper miner Big Tree Copper said it could raise as much as R100m when it listed, possibly before July, to help fund expansion of its current 100 tons a month capacity processing facilities.

“I think we could easily raise that amount,” said Jan Nelson, CEO of Big Tree Copper. “There is already $5m to $8m (R76m to R111m) that private investors are ready to put in. People in South Africa are looking for a place to put their money.”

He didn’t think the notion of the ‘South African discount’ applied domestically. “I’m tired of hearing about that,” he said in a meeting with media today.

Big Tree Company has mining rights to properties that were once worked by Newmont Mining and Gold Fields before they were abandoned. It will process extant rock piles to produce copper cathode as well as re-treat slag for a copper concentrate product. Nelson said this gave the company a green angle as it was improving the environment.

The growing copper deficit and the scarcity of new resources has sent the copper price vaulting, up 22% in the past year alone, according to Goldman Sachs. The bank said in a recent report that a commodity bull market was in its “first innings,” and that demand for green copper production would grow 41% in China during 2022.

Nelson’s ambition is to reach current production capacity of about 100 tons of copper cathode a month – in January – before adding production of copper concentrate in about two years’ time following a $4m (R61m) capital programme. This would increase production to 330 tons per month.

A third phase of expansion requiring the addition of another processing plant costing $5m (R76m) could boost production further to about 474 tons a month, he said.

At 5,688 tons annually in production that would translate into revenue of about $37m a year assuming a copper price of $9,500/t. “That is not bad for a company of our size,” said Nelson. Operating costs are currently calculated at about $4,200 per ton of copper produced, including financing costs, against spot copper prices.

Payback on an capital expansion outlay would be less than four months.

This is the equation Nelson hopes punters will like when the firm lists, especially as he is committed to distributing 30% of pre-tax profits in dividends. The dividend policy was a condition of an investment made by the R600bn financial services firm, Coronation, which has 6% of Big Tree Copper.

Nelson said, however, there was no decision on which bourse Big Tree Copper would make its debut. An offshore listing would have to “make sense” while an earlier plan to list on the ZARX has foundered. It’s likely the JSE or the Cape Town Stock Exchange will be chosen.

Currently, Big Tree Copper is tightly held but Nelson said he intended to distribute up to 15% – effectively as a free-carry – to the 5,500-strong Nababeep community that live near the mining property. Unemployment among the community was 90%. “If we look after them, they will look after us,” he said.

Community unrest in some of South Africa’s mining regions peaked last year. At the facilities of Orion Minerals’ Prieska Copper-Zinc Project, also in the Northern Cape, violent, gun-toting gangs demand contracts.

“There will be no conditions on their shares,” said Nelson. All in all, Big Tree Copper would have a free-float of between 30% and 35%.

Shareholders also include Handa Mining, Nelson’s investment company, whilst executive management has a 40% stake. Management would part with some of their shares in terms of the Nababeep distribution.

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