The answer is twofold. First, copper has been knocking around at eight-year highs for a while now, and Anglesey has a lot of copper at its Parys Mountain project in Wales.
Second, the market has been anticipating, in the context of that strong copper price, the release of a well-trailed preliminary economic assessment of the potential for development at Parys.
That assessment duly arrived on 11 January, and it didn’t disappoint.
To be sure the shares did give up a little ground when the figures were revealed, but at the close on 12 January Anglesey’s share price still stood at 7.48p, a remarkable fourfold increase on the year, and even more remarkable sevenfold increase since the sector-wide lows that were hit in April 2020.
So, with its shares up seven times and an economic study with three routes to production, all of which show significant potential profits, what’s the next move?
Two obvious choices present themselves. The first is that Anglesey goes it alone, and buoyed by the share price strength, raises new money to progress Parys through the next economic concept study, likely the pre-feasibility stage.
Alternatively, the company could bring in an industry partner to help it move Parys along, and to allow it to avoid a lot of the heavy financial lifting.
At the moment, both options are on the table.
There seems to be a ready-made partner close at hand in the shape of QME, the consultants that were behind the preliminary economic assessment. In return for a certain percentage of the Parys project, QME has the right of first refusal to undertake initial development and, for a bit more, to continue undertaking ongoing development.
Whether QME takes up that option remains an open question at this stage.
But, a couple of factors might mitigate towards a decision to continue to participate. The first is that the copper price looks like it’ll continue to remain strong into the foreseeable future.
And the second is the attractive nature of the numbers spelled out in the recent study.
The three options start out with varying pre-production capital expenditure and build out from there.
So, for a spend of just over US$70mln, the study shows that Parys would deliver net smelter revenues of US$478mln over a 12 year life, generating operating cash flow of US$226mln, and an internal rate of return of 19.6% before tax.
For a lower spend of just over US$57mln, the project looks likely to generate operating cash flow of US$219mln and, across a mooted 11 year life, shows an internal rate of return of 26.4%.
However, using a higher capital spend of US$99.6mln, Parys looks likely to generate more than US$1bn in net smelter revenues over a 12 year life, with operating cashflows ringing in at just over US$511mln. The IRR on that model works out at 26%-flat.
So, with a billion dollars of net smelter returns on offer, will anyone take the bait and offer Anglesey terms that it deems acceptable?
What mitigates further in Parys’s favour is the continuing upward strength of commodity prices. The study, across all three scenarios, assumed a copper price of US$2.80 per pound and a gold price of under US$1,500 per ounce. The respective prices of those metals now are US$3.56 per pound and US$1,841 per ounce.
Absent detailed calculations it nevertheless seems reasonable to assume that on current prices the IRR jumps closer to 30%.
It’s a compelling thought, given that the jurisdiction is about as safe as it gets. Not only is the UK free of any kind of the risk associated with famous copper mining jurisdictions like the Democratic Republic of Congo, Zambia or Indonesia, but there’s also a history of mining at Parys.
While that won’t make permitting a walk in the park, at least there’s precedent, and at a time when the UK government is desperate to encourage new revenue generators in the wake of Brexit and the economic chaos that’s following in the wake of lockdown.
“We believe it’s now very much a project that should be developed,” says chief executive Bill Hooley.
“But what’s the best way to get there? We’ve got to look at the right business model.”
Watch this space for further developments.