CopperBank’s 10-Bagger Strategy Explained by CEO Gianni Kovacevic

TRANSCRIPT:

Bill Powers: Thank you for tuning in. In today’s show, we’re going to be doing a company profile interview with its CEO of CopperBank Resources Corp. This is a stock that I own, because my friend, John Feneck of Feneck Consulting, who is a frequent guest on the show has been recommending it to me personally, as well as on the show. The ticker symbol in Toronto is CBK and on the OTC for American listeners, it is CPPKF. This is a copper junior. The website is CopperBankCorp.com. The founder and CEO is Gianni Kovacevic. And I had a nice hour-long talk with Gianni recently. So even though I’m a shareholder, I got to hear his passion, insights and plan for the company and was impressed with that. So I’m bringing him on for this profile interview. He’s also supporting the show as a sponsor.

And in about two weeks or so, I’ll be doing a webinar with Gianni and some others. And in that webinar, Gianni will be talking about the macro-fundamentals of copper. And this is something that he often keynotes on at many conferences. So this is an area of specialty in addition to leading a junior mining company. And you’ll be able to ask Gianni on that webinar more of the nitty gritty questions about the project or company that we won’t even delve into as much in this interview. So with that being said, Gianni, welcome to the show. You’re an excellent promoter. So, why should I buy your stock?

Gianni Kovacevic: Well, that’s the question that everyone listening to your program, they want that answered right away. We like the theme of copper with its role in electrification. I used to do a lot of, let’s say convincing on that. I think that’s pretty clear that people can buy into that whole wave of electrification. And I believe copper is going to surpass it’s old all-time high. Any commodity that flirts with its old all-time high, I don’t care what it is from hogs to logs, you end up in a mania phase. We are very close. Copper was printing $3.72 a pound, in a very contemporary sense the last couple of weeks. CopperBank is a junior that a retail investor can buy to have a broad exposure to this commodity with a tremendous amount of torque per share. There is underlined base value with the projects that we acquired.

And now my technical team that has an excess of 300 years of collective experience, we’ve been looking at how can we enhance the portfolio by making the projects bigger, looking for higher grades and of course, moving it down the development arc? So here are the numbers, let’s get right to the numbers. The market cap of CopperBank is about $20 million Canadian. Okay, so what do you get? What’s the upside? To give people parameters, we bought projects from people that capitulated in the bear market. They didn’t want to keep paying the property payments, that’s where we came in, but we did not want to get diluted into oblivion. We said, we will manage these projects like owner-operators will be very mindful of dilution and then when the market normalizes, we will move them forward, okay? They spent the previous operators over $120 million drilling land procurement, holding costs, metallurgy, and various economic studies.

So those projects have been de-risked by those funds. So it’s reasonable to, if for me as an expectation that one day, at least that value should be attributed to the market value of the company. A second measure, very important one. Well, if we do get strong copper prices, once upon a time, because everything I owned was stock-listed, what was the market cap high of the entire year portfolio? The answer is over $250 million. So is it plausible that if you end up in some kind of a very ebullient or euphoric copper market, that the things we own could have that kind of market cap again. Now, that would be a 10-bagger from where the share price is today. So that’s your baseline value, but we believe that there are numerous areas that we can significantly enhance the value of these projects.

One of which, I guess the biggest fatal flaw for these projects is they do not work at $2.50 a pound copper, they’re not economic. They also don’t at $3 copper, but I don’t lose any sleep at night Bill, because of that, because the world’s largest integrated miner BHP, tells the industry that 75% of all the development copper projects in the world do not work below $3.50 a pound copper. That is why you’re having this big ramp-up in the copper price to incentivize a potential future production. So we’ll, we can talk about looking at the nitty gritty. I’m going to share with you the people that were going to be driving a tremendous amount of news flow technically speaking on our portfolio in the year 2021, and we’ll be driving that news every month, all the way through to work all these various initiatives that we’ve been working towards to do exactly that, de-risk and enhance the value of these projects.

And the timing I think is very good. You can compare CopperBank to any other junior and I think people can very quickly see that this is a fantastic way to speculate on the delivery of what the work we’re going to do and the copper price. And there’s even a royalty angle, which we’ll talk about later, which is just sitting there like low-hanging fruit and the company that it was worth more than zero. But we’ll talk about that at the end perhaps.

Bill: So how would you describe yourself? As an entrepreneur and a financier in putting together this company?

Gianni: Well, I followed commodities, I opened my first account in 1996 to give people context. And I was born in Vancouver and it is the world capital of people that speculate in junior mining shares. And unfortunately, when you get these euphoric markets, a lot of shady characters get involved, but real money is raised and sometimes these people get lucky and they drill holes and they do different things. And when there’s another mania they just get out of that and they get into something else like cannabis or crypto or whatever it is. But you’ll, you go through a few cycles, the ups and downs. I understand it, I embrace that volatility. And to answer your question, the long way around, I am an investor, like everyone listening to your program. We looked at the last bear cycle, I just explained that we bought things at pennies on the dollar, which we see that they’re going to be worth more in the future.

But like Ben Graham, the value investor, the intelligent investor, brilliant man with his book that’s famous. It’s the favorite book of Warren Buffet. And he always said, “I am a contrarian. I buy from pessimists and I wish to sell to optimists.” That’s exactly what we did in this countercyclical during the bear market, we bought what I believe are very well-situated projects. And now, as a little bit more greed comes to the system by us enhancing the value and showing the evidence, the science on where we can enhance this portfolio we will be active with partnerships or divestiture of our projects with all the different mechanisms we have. And I’ve always stated this, and I’ll say it again for your audience, I am working very hard to provide a return to my shareholders outside of share price appreciation. We have many tools in our kit bag at CopperBank where yeah, it’s possible someone knocks on my door and buys the whole company, probably not going to happen that way.

What’s more plausible, is someone’s going to say, “I would like that exploration project, or I want that development project, will you partner with us?” We are fair partners. I am an investor. I am obviously not going to be building these mines and I can’t eat my shares Bill. We are all in it with equity. In all the financings that we’ve done to maintain these properties, every single one of them, you can do an audit on how we raised money, who put the money in, they were always done at a slight premium to the market, and we did not issue warrants. And I always did that, because me and my partners were putting the capital up and we wanted other people, and could sit back and say, “You could participate on your own by buying the stock on the open market.” You don’t have to wait for some five-year full warrant-type deal.

We believe that when the market really kicks into high gear, you don’t want to have a bunch of cheap warrants holding the stock back. We do not have that in CopperBank, including the way we raised our capital. So I am an investor and my entire team is fully aligned with everyone that supported our company so far.

Bill: So how did you buy your shares and what would you say your average cost basis is at this point?

Gianni: My birthday is November 9th. We IPO’d it on November 7th, 2014. Okay, so that’s six years ago. It was going to be a five-year strategy, but we ran into headwinds with that low copper price that stayed low. We had the China trade tariff that pushed all the commodities down again. And then of course, we’ve had this COVID calamity that occurred in 2020. So when the market got cheap, I bought millions and millions of shares on the open market Bill. That’s how I acquired my position. I have seven pages of insider buying. My partners also have extensive insider buying, maybe not quite as much as me. And every single time that we’ve done a financing to reiterate, above the market, no warrant, real money. We all wrote checks. And every single time I kept my pro-rata. So now, if you look at who owns the stock, Frank Holmes of U.S. Global and myself are the two largest shareholders of CopperBank.

And I have a tremendous amount of respect for Frank Holmes and Ralph Aldis. They bought their position slowly, slowly, crosses. Little people, some people wanted to get out, we would do these things all at these low prices. And of course, when the pro-rata financings came, they were there to support the company. And now you have this, the insiders have well in excess of 25% of our share capital. In fact, if you want to go down, not just insiders, but supporters of the company, 50% of the stock is held by tight hands. And then we have a huge Nobel list or disinterested shareholders. Over 1,500 people own CopperBank shares, because we issued shares to buy very established companies. So we have this broad holding other than the key members or the key supporters of the company. So I would say it’s very tightly held.

Bill: Your ultimate payday then, is going to be when you execute on this plan that you’ve laid out for CopperBank then, right?

Gianni: Yeah. I’ll make that crystal clear, I cannot eat my shares. We are highly motivated to monetize the strategy and move it forward. And if we can find these strategic partnerships, we’re open to do that. But we know a lot of guys in the business. If you look at my technical team, my group, we are one degree of separation from everyone in the entire mining world. Now I’m not doing this to be a braggart Bill. I earned it, my team has earned it. I did the keynote at the famed copper dinner in Santiago, Chile for the entire copper industry. I put 15 years of study into knowing that subject. And when I wrote my book, my best-selling book that celebrated copper and electrification, they invited me to give that very special talk. Now, why am I saying this? I mean, this very genuinely. Our group, you took seven technical members over 300 years of experience, we are one degree of separation from anyone who was anyone in the world of mining, from the biggest company to the smallest company.

So we are very carefully looking at how we can do this. We can certainly finance it ourselves. But if, and when we partner with a group, we treat this like a carpenter mentality. You want to measure it seven times, cut once very carefully, because that is how I believe not in it for salary, my team is not in it for the salary, we’re all in it for the equity. And that’s where fortunes are made. And I do believe that it is plausible that can we get back to the old market cap high of everything I owned? I really genuinely believe that and I cannot underline that enough. If we execute the plan, as long as we have positive trade wins in copper, and I don’t lose sleep about that anymore, I believe we have that. And money is literally being thrown at juniors.

So what did we do when my stock was 20, 22 cents? We didn’t finance, we bought the stock. We bought the stock. We had the pop we were looking for, even though money is being thrown at me, I announced the financing yesterday or on Thursday, January 21st. We are only raising $1,050,000, so we can execute our plan. We have a fantastic research report coming out later in February, which is going to get distributed to thousands of investors and we are actively working, boots on the ground in Arizona. The guys get there on January 28th, where we’re going to look at all these different measures and I can go over them in a couple, three minutes on the projects, we’ll do that later, where for tens of thousands of dollars, I can answer many unanswered questions. And we could look at these various areas to enhance the project.

What does it look like at different copper price scenarios and the geology? It is such a fantastic location where Copper Creek is situated right in the exact center of the Copper Corridor, which was the world’s largest production area of copper until Chile surpassed it. And all of these studies and reviews, we will put that out to the market, supported by research and hard work. I’m burning shoe leather virtually by doing calls like this, introducing the story to people. And when I’m ready to drill, if we do indeed drill later this year, I’ll do it at that time, but we’re not going to over-dilute the strategy until we see that there’s been some sort of recognition or appreciation for the work, the very hard work that my team is doing.

Bill: So what do you expect to be the main catalyst than if somebody buys your stock as a result of this call? Will it be the exploration drilling, or do you think it’s going to be the optionality aspect of a rising copper price?

Gianni: Well, that’s a pretty profound question. And the answer is there’s about five or six reasons why our share price would appreciate. Number one is simply the optionality with the copper price going higher. Every 10 cents that the copper price goes higher, because we do have historical economic studies for both projects, the net present value, it goes up by… Every 25 cents I should say, it goes up by $300 million. It’s a huge amount of torque, right? These projects, the studies were done in 2013, they’re historical. We don’t consider them contemporary, but they were done to a 43101 standard. The copper price they used was 3.20 and 3.30. What do they look like at 3.50 or 3.75 or $4, right? That’s optimization and sensitivities that we can look at.

We also have right now, looking at Copper Creek specifically. There were before, when you had byproduct credits, that some of these things were not either they were assay, but not included as a value driver. Now we have some of these semiprecious or rare-type elements within the deposit. We’re looking now, what would they do to the economics if they were included? Historical studies were done at lower copper prices, but now if we start having a higher threshold, can we bring in more resource? But here’s the home run, to establish baseline value. So we bought Copper Creek from Red Hot Copper. Red Hot Copper’s previous market cap high was $160 million. It is located at the exact geographic cross hairs of the two major mining trends in Arizona. Now, I’m talking about the one that goes North, Northwest, Resolution and Ray. And the other trend that goes Northeast towards Miami Globe. That happens exactly at Copper Creek. The result of that is we have over 400 hydrothermal breccias that create these high grade fingers or high grade pods. And below that was this historical, a 1 billion ton resource to it to establish value.

So what we want to do is, and this is to be very clear, only 40 of the 400 breccias have been drilled. There is a tremendous amount of drilling that still needs to occur at Copper Creek. So the theory is that if we go and do this work, have the evidence and look at it and have various layers of corroborating evidence, this should result as per my press release one week ago in a initial 15 to 20-hole drill program with shallower holes, where we start to look at near-surface resource at Copper Creek to bring in additional enhanced resources to what is already one of the largest copper porphyries in the world. You can compare Copper Creek to and there is a list of the 50 of the largest undeveloped copper projects in the world. Copper Creek is in that bucket. Two-thirds of those projects are owned by majors by the way, Bill. So how many juniors have a project of that size? We also like the location for another very important reason. And I’m working hard with certain groups to really drive that value.

Major mining companies have three choices for their growth. They have to go to three basic geographic areas. One is at elevation. I’m talking about the Andes in Peru, Chile, Ecuador at three and 4,000 meters where you have to pay for everything, the water and the power, you got to fly the teams in week in, week out for the life of that operation. That costs money. The CapEx for those projects, before you even get to the mine, you’re talking one, two, $3 billion. Their other choice is to go to AK47 protection countries. That’s just the reality. The copper resources are not unfortunately in perfect places. Now, if you want to pay for that, if you want to have that risk exposure, that’s their prerogative, or they’re going to have to go to established well-known, everyone’s already there, copper mining camps.

And Arizona, I can tell you this is the number one existing copper camp in the world. That is where major mining companies want to have future business. Their workforce wants to be there, they can raise their kids, watch their children’s soccer practice at the end of every day. The three towns that are associated with Copper Creek all have to do with copper mining. We are in Pinel County, which caters into the copper corridor, not Pima County, which is closer to Tucson, Arizona. And that is something we firmly believe there will be significant interest in not just for our project, for people that do have projects in that part of Arizona. So there’s all those different reasons where we can rely on the existing baseline copper price rises. It just makes the projects more economic based on those historical studies. We can do the work and enhance the value. We can also do optimizations on those historical economic studies. And then we can also look at the partnerships or how on a very dilution-friendly way can we move this forward?

And the goal, the destination, it’s a forward-looking statement, but can we get to the old market cap high of everything we own is 10 times higher than today’s market cap? So there’s your delta. There’s a tremendous amount of value that’s to be captured. And we can unlock that a little bit with the copper price rising, a little bit with hard work and a little bit of success in the drill bit, but we’re looking at doing all three.

Bill: Gianni, you’re a contrarian, and you’re a financier, as you’ve already mentioned. So a sophisticated investor of which many are who are listening to us would say, “That’s great, but I want to know a little bit more about the divestiture in 2013, when you picked up this project. Was there a fatal flaw or some hair on it that perhaps could be a hindrance to your advancement in the future?”

Gianni: Yeah, that’s a very good question. So if it’s so good, or if I’m telling you that the projects are so interesting, why did they sell them to me? Well, we’ll start with the first portfolio we bought, they didn’t sell, they partnered with me. They said the major shareholder was a lawyer an 88-year-old lawyer out of Vancouver, Canada. A very fine gentleman. His name was Arnold Armstrong, who passed away sadly one year ago. But he basically said, “We will put our project in with your strategy, because it will be dilution-mindful.” And they got equity. In fact, they were the largest shareholders. They got stock. They had belief that those projects eventually would be developed. And then with the Copper Creek project, something similar occurred. The holding costs for Copper Creek were $675,000 U.S. per year. That’s a lot of money for a junior to pay. It’s a $1 million Canadian. They have to raise year in, year out.

So some of the key investors had suggested that look, “We own a bulk of the stock. We like your dilution-mindful strategy. If we were to take a partnership sort of concept where we put in the project for shares, not cash, we’ll wait it out with you. And then collectively, we could see this when the copper market normalizes, your technical team can then move it forward.” So it wasn’t a sale. And I do believe now I bought that in the summer of 2018, really on the dark, dark days. Remember that after the trade tariffs came in, it was ugly. You couldn’t raise money. So we did this partnership. We issued shares, but first I had to negotiate. I did not want to pay $675,000 a year. So collectively with the previous management team, we went to the underlying landowners and it’s very simple. The holding costs are now $125,000. And the land has been put in that we are the owners of most of that property.

So it’s either on an Arizona State mining claim or private, real property that we own, that we own over 10,000 acres of real property between a Nevada and Arizona, including a development, our headquarters, it’s a building with a compound. We own it. There’s no mortgage on this stuff. And we did this by making a couple deals. One was with Freeport-McMoRan, where they get a small royalty. Now it’s in an area that does not have any resource yet, but that’s how they get their money back. And with BHP Billiton, they had a small piece and the underlying property owners, it was a family that gets paid every year until the year 2037, we pay them $50,000. And then in the year, 2036, they get four lump sum payments. But it’s a property acquisition to be clear. So that’s my whole, I got to pay them $50,000 a year up until 2036, very manageable. And that’s when we executed. And then we started measuring, we started looking at where we can enhance this project.

And I can tell people the reason we’re starting these work programs, is because we believe there’s a treasure trove of areas where we can enhance the value of Copper Creek. Boots on the ground starting next week, lots of news all the way through the Spring, and it’s not going to cost a lot of money. So the $1,050,000 that I announced on January 21st, I’m going to keep that open for a couple of weeks. This is not investment advice, but it just happens to be a live ball. The stock is trading higher than the financing now, because there’s so much demand, but people should take a look at our website and take a look at some of the claims that I’ve made. And if they feel that a $25 million market cap for what we own is interesting, they can call me or contact me any time. I’m available, I work 24 by seven, Sundays are fine for now, because it’s the work we’re doing. And my email is [email protected]. And my phone number they can get also, once they’ve made an email, we can do a phone conversation with anyone that’s interested.

Well, I got one more thing, one more thing to leave it off with. We want to talk about CopperBank Royalty Corp.

Let’s imagine we’re able to move the portfolio forward. We don’t have a royalty on our Nevada project called Contact and we have a royalty opportunity at Copper Creek. So we have an organic ability to create a royalty company with those royalties. I don’t imagine that I would sell the projects royalty-free. We can keep that, and we have metrics now, because a couple of companies have went public and we have comparables, they’re buying royalties 0.5 and 1% and 2% royalties. Nova Royalty is one example. It’s got a $300 million market cap and look at what they’re buying. I have some of my technical guys doing comparable slides. What would a 1% royalty on both our projects look like? What would a 2% royalty on both our projects look like? And if I was to segregate that, put that over here, maybe we can join forces with someone else. Maybe we could lead the charge. We have an organic royalty opportunity just sitting in CopperBank.

And it’s a little bit serendipitous that Frank Holmes is my largest shareholder. He wrote the first check for Franco Nevada. He knows a thing or two about royalties. We’re looking at that very carefully. There is a lot of value as another business unit. So we have exploration projects, we have development projects, but we also have this royalty thing that we’re looking at. I’ve done two press releases on it, people can look forward to that in the future, but don’t forget about it, because I think the market and the industry needs, because of this huge wave of electrification and copper, going to be an important story for really the rest of this decade, we want to have that as well, and I can not eat my shares. I want to monetize these things Bill, I cannot stress that enough, but people should look at that as well. That it’s worth more than zero. I just want to leave it off there.