In a two (2) year period Tesla (TSLA) has risen more than 700%. TSLA has now a market capitalization of around US$464 Billion.
The rise of Tesla tell us that there is a global shift towards vehicle electrification. TSLA’s market valuation is the envy of all car makers. In their bid to improve their market valuations, car makers will copy TSLA and make prominent in their line-up electric motor vehicles. There is a growing trend of vehicle electrification and that trend is gaining traction due to the rise in valuation of TSLA. Market now believes electrification is the future. Vehicle electrification needs a lot of copper wirings.
Prices of copper, a metal used in wiring, have surged to a two-year highs as producers struggle to keep up with strong demand in China.
But the longer-term prospects of copper is in global electrification, including the shift toward electric vehicles.
That means copper is considered a green metal and big mining companies want more of it in their portfolios. Stellar growth in demand is imminent in the near term while supply will take time to develop. The key now on copper is on established copper miners. Among the established copper miners is Atlas Consolidated Mining and Development Corporation (AT).
AT has a fairly profitable mining operation and it generates positive free cash flow. Its biggest drawback is its huge debt burden. Proceeds of those debts were used to fund the development of the mines. The skyrocketing price of copper will give AT the ammunition to wipe the debts out overtime and be able to distribute returns to shareholders.
AT’s debt on its balance sheet as of 1H 2020 is at around 30 Billion Pesos costing around 1.1 Billion Pesos of finance charges dragging its net income to just around 0.2 Billion Pesos. But mining operations generated cash of 3.2 Billion Pesos while essential capital expenditures were just at 0.6 Billion Pesos. Skyrocketing copper and gold prices could make AT a cash machine giving it the ability to repay the debts and distribute returns to shareholders.
Disclaimer: This is an independent analysis for discussion purposes with the aim of giving stock traders and investors an independent perspective. Accuretti Systems Inc. does not hold any shares of Atlas Consolidated Mining & Development Corporation.