KRO Lite Digest - May 2025

Top Highlights

• Copper Smelter Pressure: Almost a million tonnes, 8% of China’s copper-smelting capacity, went dark in March 2025 as treatment charges sank below $0, causing refiners to lose money. Many smelters are slowing or shutting down due to tight supply and low fees. The crash in benchmark smelting fees (TC/RCs) to $21.25/ton in 2025 is the lowest in over two decades, reflecting a growing mismatch between smelting capacity and concentrate supply.
• Gold's Strong Message: Gold almost touched $3,500 an ounce this month, sending a strong message that "A new era for real assets has begun". Inflation-adjusted gold prices have broken above the peaks from 1980 and 2011. Gold is climbing due to sticky inflation, economic uncertainty, high global demand, and big investors returning to the market.
• Key Buy Picks: Marin Katusa has added to his position in Dakota Gold (DC.NYSE) and believes the company is very cheap under $2.75 per share. He also believes Entrée Resources (ETG.TO) could be bought by a major for $3-plus per share, recommending it as a Buy Under CAD$2.25, although noting it as Very High Risk.

Key Actionable Insights

Quick Portfolio Snapshot

• Lundin Gold (LUG): Started 2025 strong with a 5% increase in Q1 gold production from Fruta del Norte mine. Finished plant expansion. Had a 31% gain in one month after a buy recommendation last month. Current recommendation: Hold.
• Enbridge (ENB): Approved building the Traverse Pipeline and confirmed plans to supply energy to data centers. Received emergency status for Line 5 tunnel project. Maintained its dividend payout. Facing higher spending and borrowing costs which could pressure earnings short term. Current recommendation: Hold.
• Brookfield Renewable Partners (BEP): Reported $315 million in FFO in Q1 2025, up 7%. Added 800 MW and plans to add 8,000 MW this year. Steady cash flow with 90% of power sold under long-term contracts. Finished buyout of Neoen and announced a new deal for National Grid Renewables. Current recommendation: Katusa Free Ride: Hold.
• Carbon Streaming Corp (NETZ.NEO): Announced filing a lawsuit against former executives and consultants for alleged breaches of fiduciary duty, fraudulent misrepresentation, and unjust enrichment. Current recommendation: Hold.
• Copper Standard Resources (CSR.CSE-Canada): Reported a smaller net loss for 2024 and ended the year with C$620,215 in cash. Needs more funding to keep moving forward. Current recommendation: Hold.
• Dakota Gold (DC.NYSE): Restarted drilling at Richmond Hill Gold Project on April 1, focusing on infill and sampling for an upcoming technical report. Current recommendation: I Marin Katusa have added to my position. Buy under $2.75.
• Entrée Resources (ETG.TO): No new company updates. Marin Katusa believes its world-class deposit is one majors can't live without and Rio Tinto will want to produce from the Entrée land. Current recommendation: Buy Under CAD$2.25. Very High Risk.
• Li-FT Power Ltd. (LIFT-TSXV): Q1 2025 results showed a small loss but solid cash and working capital position. Test results from Big East deposit showed up to 98% lithium recovery. Started environmental baseline data collection for permitting. Current recommendation: Hold.
• NGEX Minerals (NGEX.TSX): Phase 3 drilling at Lunahuasi Project continues to deliver strong copper, gold, and silver results. Extended high-grade mineralization over 800 meters. Current recommendation: Hold.
• Uranium Energy Corp (UEC.): No new updates. Current recommendation: Hold.

Catalysts Coming Up

• Dakota Gold (DC.NYSE): Expecting an Initial Assessment with Cash Flow (IACF) technical report in mid-2025. Updated economics on the heap leach gold project are expected before September.
• Entrée Resources (ETG.TO): Marin Katusa will do a full analysis on different potential outcomes for Entrée in next month’s KRO.
• NGEX Minerals (NGEX.TSX): Final drill results and an early resource estimate are expected later this year.

Latest Reports You May Have Missed

• This month's Katusa’s Resource Opportunities report is titled "The Copper Pressure Cooker".
• Key sections in this report include: Act 1: The Pressure Cooker, Act 2: Signals from the Bond Market, Act 3: The Copper Storm and Whipsaw, Act 4: The Supply Side Squeeze, Act 5: Copper Producers Comparative Analysis.
• Also covered are a Gold Update and detailed Company Updates.

Sector Snapshot

• Copper: Experienced significant volatility throughout 2024 and into 2025, moving from $4.03 in January to $4.47 in March, dropping to $3.98 in April, and rallying back to around $4.15 in a week. As of May 6, the price was over $4.75 per pound. Copper inventories at the LME and SHFE fell in the last 3 months but are still much higher than in 2023. Since March 2025, days of inventory have started falling again. There's been a shift in where copper is stored, with SHFE holding 46% as of April 11, 2025, compared to 14% at the end of 2024, potentially signaling China is buying more. The price gap between CME (U.S.) and LME (Europe) copper is widening, with CME prices much higher, possibly due to tariff fears and creating arbitrage opportunities.
• Gold: Almost touched $3,500 an ounce this month and is holding above $3,100. The Gold-to-Copper ratio has climbed to its highest level in modern history, indicating expected slower global growth, sticky inflation, and rising financial system risks. Global gold demand is at its highest level in over 12 years. Gold ETF flows turned clearly positive in February and March 2025. Gold miners are seeing their best margins in years at current prices.