The Phoenix Copper Ltd (LSE:PXC) share price has not returned value for its shareholders since its IPO. In fact, investors who bought the stock when it was first listed are currently down around 37%. And if I had bought the stock a year ago, I would have lost nearly 50% of my investment.

But is all this about to change direction? After all, the mining stock even soared over 50% in the first three months of this year before losing it all.

Key Points 

• Phoenix Copper Limited is on a bearish trend. Its shares have been down over 50% in the past year.  
• The company lost $1.052m after charging an unrealised foreign exchange loss on sterling-denominated assets of $503,593.
• The company is finalising discussions with several parties with a view to placing up to $80m of corporate copper bonds. 

What does Phoenix Copper do?

Phoenix Copper Limited is a US-based company focused on the production of base and precious metals founded in 2013. It engages in the exploration and mining of low-cost gold, silver, and copper.

Its Empire Mine project is located near Mackay in Idaho. And it also has exploration projects for gold and cobalt in the Custer and Lemhi counties.

The company was formerly known as Phoenix Global Mining Limited and changed its name to Phoenix Copper Limited in July 2019.

Recap on 2022 financials

In the report released on 22 September 2022, there was an increase in net assets from $37.70m to $38.22m. There was also a significant increase in its investment in Empire Mine to $29.73m. More so, the company loans to operating subsidiaries increased to $25.23m. 

Amidst the increase, the company recorded losses. The company lost $1.052m after charging an unrealised foreign exchange loss on sterling-denominated assets of $503,593. The period-end cash balance of the company decreased from $22.88m to $9.05m.

That being said, the recently released corporate update shows the company has finalised its bond arrangement. In addition to the bond, the company has gotten a short-term loan from Riverfort Global Opportunities PCC Ltd.

The bull case for the Phoenix Copper share price 

The trend in the share price performance of the company is not peculiar to Phoenix Copper Limited shares. As this has generally been the case for mining stocks in recent times due to the weakness in markets, geopolitical conflicts, and other unpredictable factors in the mining sector.

Notwithstanding these challenges, the company is focused on optimising its mining and processing plants to make them profitable and robust. The recent corporate update shows that the company is engaging in fundraising activities to ensure that it has enough capital to engage in production and other operational activities. Currently, discussions are being finalised with various parties with a view to placing up to $80m of corporate copper bonds. 

With the current market conditions, the coupon payable on the bond has been amended to the higher of a copper price coupon or an interest rate coupon. As stated earlier, this process has not been concluded. However, once finalised, the firm will have significant capital to sustain future drilling programs. 

Phoenix Copper is also refining its engineering plans and examining methods of improving cash flow through environmentally innovative ore haulage and recovery processes. It is predicted that if this is successful, the operational cost of diesel and reagents will be significantly reduced.

Once these measures are materialised, the Phoenix Copper Limited share price could explode and be on a bull trend as the company may be lucrative and have a strong balance sheet. At least, that’s what I think.

A bear case for Phoenix Copper’s share price

On the other hand, it seems that Phoenix Copper’s share price may not be coming out of its bearish trend any time soon.

The business, copper, and sterling have both been extremely volatile of late. And currently, sit at around 30% below their highs for the year 2022. Also, the impact of Covid-19 and the ongoing war in Ukraine has resulted in inflation in energy prices, reagent costs, and steel supply.

Management was forced to halt production for some time and focused on fundraising as it could not cope with the disruptions that plagued mining activities. In the meantime, the group continues to incur losses and rising debt expenses, resulting in the previously highlighted drop in cash.

Also, pending the finalisation of the bond arrangement, the company entered into a short-term loan facility of $2m with Riverfort Global Opportunities PCC Ltd to strengthen US dollar operational working capital ahead of the 2023 exploration season.

Meanwhile, the bond arrangement is still yet to be successful if it fails to pull through, the company will still be short of funds to pay back this loan and also sustain its exploration activities.

All of this is to say there are still giant question marks surrounding this enterprise. And in the worst-case scenario, the downward momentum in the Phoenix Copper share price could be set to continue.

Phoenix Copper Share price prediction 

The Phoenix Copper share price has a 52-week range of 18p to 48p. Looking at analyst consensus, the 12-month share price prediction for the firm stands at 66.74p. Compared to the current valuation, this forecast would suggest the group is significantly undervalued.

However, it’s critical to remember that all share price predictions are built on assumptions that may not come to pass. It’s also worth pointing out that this price target comes from just one institutional analyst and may be wildly inaccurate.

Should I buy Phoenix Copper shares today? 

All things considered, I will not be adding Phoenix Copper Limited shares to my portfolio. While it’s undoubtedly an interesting story to follow, the risk profile is simply too high for my personal threshold. With the financial fundamentals of the company appearing weak, the stock performance has struggled over the years. And the potential of the company is not convincing enough to persuade me to invest in it right now.

Article Sources

1. London Stock Exchange: “Phoenix Copper Limited Corporate Update dated 24th March 2023“.

2. Phoenix Copper Limited: “Interim Results dated 29th September 2022“.

Prosper Ambaka does not own shares in any of the companies mentioned. The Money Cog has no position in any of the companies mentioned. Views expressed on the companies and assets mentioned in this article are those of the writer and, therefore, may differ from the opinions of analysts in The Money Cog Premium services.