Usha Resources: A Tiny Market Cap But Giant Copper and Cobalt Potential

Source: Peter Epstein for Streetwise Reports   09/28/2021 

Usha Resources has multiple copper, cobalt and gold properties and projects across the U.S. and Canada. Cobalt in the U.S. would be hugely desirable; Usha could find meaningful deposits of cobalt and copper. A small market cap with near-term drill results make Usha a compelling risk/reward proposition.

There are hundreds and hundreds of junior miners—(small-cap natural resource companies)—looking to explore, discover and develop mineralized properties around the world. How does one pick from so many possibilities? Clearly, a company with one or more strong projects is a necessity.

And, projects need to be in safe, prolific, mining-friendly countries. Next, projects should be in high-demand metals/minerals—few investors are excited about thermal coal. Another critical factor is the management team, board and advisors. Finally, the valuation needs to be attractive.

Although there’s plenty that can go wrong and red flags to watch for, there are junior miners offering compelling risk/reward propositions. One such company is Usha Resources Ltd. (USHA:TSX.V; USHAF:OTCQB) soon to be cashed up post its C$3 million capital raise at C$0.30.

Companies with large cash balances relative to enterprise value {market cap + debt – cash} have tremendous blue-sky potential, with robust liquidity runways to make things happen.

Usha Resources’ enterprise value will be C$7 million, with >C$3 million in cash (pro forma for a pending acquisition). Management controls two western U.S. assets.

Usha is acquiring an option to acquire a 100% interest in a copper-cobalt-gold project (with high-grade zinc showings) in a past-producing region of Montana, and a promising gold-copper play in Arizona.

The option to acquire a 100% Interest is for a copper-cobalt-gold property ~32 km south of Butte, Montana. The Green Hills project has seen >10,000 meters of drilling by majors including BHP, Cominco, Homestake, Phelps Dodge and Rio Tinto. This is a company that checks a lot of boxes and has what I believe is a cheap valuation.

Management has indicated that multiple mid-tiers/majors continue to follow Usha’s progress at Green Hills. Significant drill and trench results include:

• 1.2% Cu, 0.036% Co, plus 0.20 g/t Au over 11.7 m
• 0.15% to 0.30% Co, plus up to 1.14% Cu over 96.3 m
• 1.8% Cu, plus 0.45 g/t Au over 1.25 m
• 19.0% Zn over 0.7 m
• 19.8% Zn over 0.4 m
• Up to 4.7% Cu, plus 0.07% Co, & 2.3 g/t Au in trenches advanced by BHP

The land package is interpreted to be age-equivalent and part of the same Belt that includes Teck Resources’ world-class, past-producing Sullivan Mine in B.C., Canada. Recent airborne geophysical work delineated high-priority electromagnetic anomalies (often indicative of sulphide mineralization) and numerous major and minor structures that warrant follow-up exploration and possibly drilling.

From Usha’s August 12th press release,

“The Company’s plan in coming months at Green Hills is to build on the geophysical work completed through further geophysical mapping & interpretation, sampling, and other techniques in order to launch a comprehensive drill program with the goal of completing a maiden resource on one or more areas.”

“We are thrilled to have acquired such a significant project at a time when the demand for cobalt & copper is increasing so dramatically,” stated Deepak Varshney, CEO of the Company. “This project checks off all the boxes – a mining-friendly jurisdiction, easy year-round access, great historic results, and world-class vendors.”

Security of supply and ESG considerations ensure high demand for battery metals in North America

Battery metals (lithium, cobalt, copper, nickel, graphite, manganese) play major roles in lithium-ion batteries, the backbone of electric vehicles. Three of the most important are copper, cobalt and lithium.

Moreover, production of battery metals in the U.S. and Canada is especially important for environmental and security of supply reasons.

On both sides of the U.S. border, near the Great Lakes, resides a rapidly growing EV and battery manufacturing hub. Battery metals to supply the region will be sourced from China, the DRC (Africa) and South America—UNLESS companies like Usha are successful.

Why is regional proximity such a big deal? ESG considerations are making it extremely important for OEMs to be able to show their customers reliable, conflict-free, clean (environmentally-friendly) supply chains.

Materials and finished goods traveling tens of thousands of kilometers have fossil fuel emission problems. Therefore, any and all copper and cobalt production from North America will enjoy high demand.

Both copper and cobalt metal prices have doubled from COVID-19 lows. Some analysts believe further gains are coming, but even at current levels, companies making new discoveries and prudently advancing projects could see substantial gains.

Copper is the single-most important battery/green-energy metal on the planet

Copper is the most important link to the next 50 years of technological advancement. EVs use ~4x more copper than gas-powered cars (not including copper needed in charging stations). 

As tens of millions of EVs plug into the grid, substantially more copper will be needed to build and connect new power plants. At the same time, the world’s undergoing a paradigm shift to renewable energy platforms, which are highly copper-intensive.

Wind & solar farms use a staggering amount of copper in wires, cables, motors & transformers. Bottom line, anything plugged into a wall and/or connected to the Internet leads to more copper-supported power generation.

The story behind cobalt demand in North America is different, but no less compelling. Cobalt is used in most (but not all) Li-ion batteries that go into EVs. The vast majority of mined cobalt comes from the DRC, and the vast majority of cobalt refining occurs in China.

Cobalt is the poster boy commodity of the ESG revolution. OEMs have so much to gain by sourcing cobalt from North America, especially if the cobalt can also be refined and recycled regionally.

There’s going to be a number of battery materials plants in the U.S. & Canada. First Cobalt has a refinery in northern Ontario. Others are coming for one very important reason—recycling. Every OEM and battery company on the planet wants in on Li-ion battery recycling.

Multiple ways for tiny Usha Resources to win in an epic battery metals bull market

This is great news for companies like Usha. Even if management can’t get all the way to production, there’s a good chance that strong demand for battery metals will support projects in the Western U.S. as satellite deposits for regional mills.

There are multiple ways to win here…. Going into production, selling ore to a third-party mill, partnering with a mill owner or a miner or farming-out projects to get free-carried. Companies with the right teams, in the right countries, advancing the right metals / minerals are well positioned to thrive.

The gold-copper Lost Basin project in the Lost Basin Mining District in Arizona is a sizable property of >5,000 acres. Recent work completed by the company identified the following; Red Basin—highly anomalous soil samples, 10 assaying >0.2 g/t gold and as high as 11.1 g/t gold. Copper Blowout—four chip samples assayed >1.00% copper, and as high as 1.53% copper.

Mallory’s Trench—chip samples as high as 2.6 g/t gold. The company’s plan is to build on existing work by conducting a month-long trenching program and soil sampling, geologic mapping and rock sampling of the three named zones, and other areas of interest, including the Ideas Lode West vein.

Historical surface samples at Lost Basin returned up to 77 g/t gold. The primary objective of exploration will be to further develop Usha’s understanding of the nature of the gold mineralization at Lost Basin as it continues to develop targets for a follow-up core drill program later this year.

Make no mistake, Usha Resources’ two projects are early-stage, but that’s more than reflected in the company’s modest enterprise value. Exploration success is where some of the biggest stock market gains come from, albeit with commensurate high risk.

With a stellar management team and board, especially for such a small company, additional high-impact properties are being pursued to diversify exploration risk and enhance the project portfolio.

All roads, ESG and other, lead to regional sourcing of critical metals. Usha Resources (TSX-V: USHA) (OTCQB: USHAF) is in the right place, at the right time, with the right team, chasing the right metals.

Peter Epstein is the founder of Epstein Research. His background is in company and financial analysis. He holds an MBA degree in financial analysis from New York University’s Stern School of Business.

Disclosures: The content of this article is for information only. Readers understand and agree that nothing contained herein, written by Peter Epstein of Epstein Research [ER], (together, [ER]) about Usha Resources including but not limited to, commentary, opinions, views, assumptions, reported facts, calculations, etc. is to be considered implicit or explicit investment advice. Nothing contained herein is a recommendation or solicitation to buy or sell any security. [ER] is not responsible under any circumstances for investment actions taken by the reader. [ER] has never been, and is not currently, a registered or licensed financial advisor or broker/dealer, investment advisor, stockbroker, trader, money manager, compliance or legal officer, and does not perform market making activities. [ER] is not directly employed by any company, group, organization, party or person. The shares of Usha Resources are highly speculative, not suitable for all investors. Readers understand and agree that investments in small cap stocks can result in a 100% loss of invested funds. It is assumed and agreed upon by readers that they will consult with their own licensed or registered financial advisors before making investment decisions.

At the time this article was originally posted, Peter Epstein owned shares of Usha Resources and the Company was an advertiser on [ER]. 

Readers should consider me biased in my view of the Company. Readers understand and agree that they must conduct their own due diligence above and beyond reading this article. While the author believes he’s diligent in screening out companies that, for any reasons, are unattractive investment opportunities, he cannot guarantee that his efforts will (or have been) successful. [ER] is not responsible for any perceived, or actual, errors including, but not limited to, commentary, opinions, views, assumptions, reported facts & financial calculations, or for the completeness of this article or future content. [ER] is not expected or required to subsequently follow or cover events & news, or write about any particular company or topic. [ER] is not an expert in any company, industry sector or investment topic.

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