 Good day fellow investors! I often mention how I'm very bullish on copper. There is a supply gap forming so copper prices should go up and that should benefit copper miners. So it would be fitting that I also offer you copper investment ideas, copper miners that I think are low-risk, high-potential reward investments. And today I'll discuss hardware minerals. The other copper investment that I like very much and I'm invested in is Neveson Resources. So you can check the video above in the link. Let's start with a quick overview of the copper environment and then we'll switch to hardware minerals. This is a very, very important chart because it shows the demand for metals in relation to the cycle in economic development. China is not entering the mid-cycle and there will be more demand for copper, lead, nickel, aluminum and so on. India is still in the early cycle so more iron or coal but it's switching due to technological developments also to copper building infrastructure so we can see also future high demand coming from India that will boost global demand for copper. If the United States start to repair their infrastructure as some have promised we will see again increased demand for copper. Another positive for copper is the impact of electric vehicles. For example one electric vehicle consumes three to four times more copper than a normal car. On top of it you have to make your charging point at home, the superchargers, all those things consume and demand more copper. So if we switch to an electric economy copper will explode and also nickel that we have mentioned in these other videos. That was the long term. In the short term copper is entering into supply deficit and you can see here from the international copper study group how copper has been in a deficit in 2016 will be in 2017 and will also be in 2018. This is because the average industry or grade is declining so all the low hanging fruit in copper has been mined and now companies have to dig deeper higher costs in order to produce more copper and that simply limits the available supply at lower copper prices. What is expected is that at this moment with current prices simply a supply gap will form soon and a big one because the possible projects are simply not feasible at these copper prices below three dollars. I personally expect a balanced copper price above 3.5 in the next 10 years and perhaps even going to four. The World Bank copper price forecasts they are very conservative in their forecasts no electrical vehicles impact in their forecast but however the copper price is really expected to significantly grow over the next decade. Apart from copper hot bay minerals is also a zinc producer so you can check my zinc video as 21% of revenue hot base revenue comes from zinc. Let's start with hot bay minerals straight at both of the New York stock exchange and of the Toronto stock exchange so you can buy it on both stock exchange. It has a long life low cost asset base now long life just two projects are long life. The recently commissioned constancia mine Peru is 19 years expected life lower mine has 10 years and two mines are about to be closed down soon. Nevertheless we'll calculate each present value for each mine and the biggest part of hot bay is the Rosemont project that has also 19 years of life expected but it's not yet developed they need still one permit for water regulation so we'll see about that. Let's start immediately with the constancia mine in Peru it's hot bay's flagship mine 19 years of life and in addition they have done some additional mining at the Pampa Cancha Deposit close by so they have increased production for the next five years. Here you can see the expected production copper production more than 100 000 tons per year molybdenum gold silver so a very diversified mine and the most important thing is the five year averages cash cost and sustaining oiling costs are below one dollar per pound for cash costs and one dollar 27 for all sustaining mining costs later that will be higher. What I have done I have analyzed future cash flows for each of the hot bay mines and projects deducted the costs and calculated the present values of those operations at the end I'll compare the present values with the depth and get to a fair value of hot bay. I think that's the only way to analyze a miner is to really analyze it segment per segment present values total of present values and then you get to an end result so that's what I'll do here in this video. Let's start immediately constancia copper production as I said 100 tons molybdenum gold silver ounces gold and the silver is sold already with a streaming deal with silver written so I will also arrange for that 50% of the gold is sold at 400 dollars per ounce and 100% of the silver is sold at 5.99 dollars per ounce to silver written nevertheless also standing cash cost 1.27 per pound so hot base profit from constancia should be 1.63 dollars per pound in the next three years that's around 380 million per year pre-tax 250 million after tax with their tax rate so the current number of shares outstanding is 236 million so you can expect cash flows over 1.06 from constancia in the next five years from then onwards expected production will decline and I expect cash flows of around 0.5 dollars per share for the remaining 14 years the present value at a 10% discount rate I know that this country is high but that's what I like to use for miners and that's high for the risk already producing commissioned mine as constancia is comes for me to 7.12 dollars per share but that's for constancia let's go to the lower mine current sink prices I made this calculation at sink prices of 1.12 didn't increase it for practical reason so giving again a margin of safety at sink prices are much higher so I have summed up all this cash flows expected here discounted at the 10% discount rate and the value came at 461 million or 1.95 per share 777 mine and reed expected to be closed in the next few years nevertheless their cash cost is negative there is some potential to exploration in the area but let's keep our analysis conservative and according to the technical report for the two mines we can expect the present value for the two mines to be 0.3 per share and 0.1 per share so we add 0.4 dollars per share for the present value of those mines at a 10% discount rate in total constancia 7.12 lower two dollars with higher sink prices plus 0.4 we are at 9.6 as this has been done with lower commodity prices we can easily add a present value of 10 for those projects now let's go to the future of hotbase the rosemont project expected to produce 10% of us copper supply with the life mine of 19 years so that's an excellent project production costs are expected to be very low at 1.29 per pound and calculating from the technical report present value at a 10% discount rate with copper prices at three dollars per pound which i expect them to be in the next 20 years is 500 million or two dollars per share however this project is very very sensible to copper prices and if copper prices reach 3.5 on average in the next 20 years the present value is already 1 billion if they reach four dollars per share the present value is already immediately 1.5 billion or six dollars per share so when you take into account that rosemont is really the leverage on copper prices and that's what makes hotbay interesting 10 dollars we had there plus let's say it will be four dollars per share the value of such a project that's already at 14 dollars the only issue with the rosemont project is they received the us forest service permit but they need still need a section 404 water permit from the us army corps of engineers when will they receive it i don't know but a negative water permit were would delay development of the mine but probably only delay or increase some cost because they have to arrange how to do it so we'll see about that that's definitely a risk now we have calculated the net present values of all the projects from the cash flows so already deducted the costs the investments and now we still have to deduct the current debt and then we'll get to the fair value of hotbay hotbay has a very very large debt load 1.3 billion but we can see the maturities are pretty far from now six years for the 400 million note and eight years from the 600 million note so expecting copper prices to increase there will be no problem for hotbay to service that especially as they have high cash flows now they're operating cash flow is around 400 million dollars or two dollars per share currently so they can easily service the debt payments just a quick look at my model these are the cash flows per year in order to pay out all the debts in 2023 and 2025 and you can see how from 2019 hotbay has a safety cushion of 500 million on its balance sheet in cash and that they are gross in the future so no worries about hotbay going bankrupt especially with the cash they have a look at the stock price hotbay has been really cheap especially i did this analysis two months ago so when it really was cheap so it was a good call now it's a little bit higher but nevertheless if we add everything up we get to a stock price of around 14 minus the debt per share which is five bucks so i get a fair value for hotbay of nine dollars per share which is still above the stock price of seven the risk for hotbay a recession copper prices get hammered in a recession and the stock price would also suffer so that's always a risk when investing in industrial commodities like copper the second risk is the water permit for their rosemount project if they don't get it stock price will get hammered and the delay in those kind of projects really is something investors don't like so those are the two main risks for the company the debt isn't that much of a risk because of the high cash flows and the long-term majority of the debt so a very interesting high exposure to copper investment my target for the company is 10 would be a fair value now as 14 is the net present value of the projects we deduct the debt we get to a present value net present value of nine for the company exposure to higher pro copper prices so i think 10 is fair now if copper prices hit 3.5 dollars per pound 4 dollars per pound then really i see hotbay at 20.25 so it's a pretty high potential investment with a margin of safety coming for the low cost and excellent projects in the pipeline if you have any other copper investment ideas please leave them below happy to take a look at them if you have any interesting insights of hotbay also leave them also please share them with us in the comments subscribe if you haven't subscribed yet as there will be plenty interesting analysis like this on this channel thank you for watching and i'll see you in the next video