Cobre Share Price Flat Despite Striking Gold (ASX:CBE)

Cobre Share Price Flat Despite Striking Gold (ASX:CBE)

One of Australia’s newest and most exciting mining entrants on the ASX has had a lacklustre start to begin trading despite the news of striking gold.

Cobre Ltd’s [ASX:CBE] share price opened 50% higher this morning on the announcement of significant high-grade copper gold results.

At time of writing the share price has since dropped 5.56% lower than the previous close of 18 cents.

CBE listed on the ASX back on 31 January of this year.

The junior miner’s listing caused quite the fanfare among small-cap investors after raising $10 million through a heavily oversubscribed initial public offering.

The Sydney-based company issued 50 million shares at $0.20 each in a bid to advance exploration at its Perrinvale project in Western Australia.

Where was the fanfare today?

Usually, good news should mean the share price goes up, right?

At least in principle it works that way.

Unless it’s not actually ‘good news’.

Mining is a risky business — gold mining in particular.

But investing in gold can be a great defensive investment strategy, particularly with the current economic crisis.

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There is a whole lot you need to get right before the mineral is even extracted from the ground.

Cobre Gold Exploration Project


This is a handy little graph to keep in mind when considering mining shares.

Cobre holds an 80% stake in Toucan Gold, which owns the Perrinvale project in WA’s goldfields region.

The company is currently in the discovery phase.

The Perrinvale project sits on a rare a high-grade VMS (volcanic massive sulphide) system enriched in copper, gold, silver and zinc.

The last significant deposit in Australia was discovered more than a decade ago by Sandfire Resources Ltd [ASX:SFR].

Preliminary work was done in the area bank in June 2019, with the findings showing very high-grade VMS base metal mineralisation.

Specifically, gold mineralisation was 3.2 grams per tonne at shallow depth.

While today’s announcement reveals further high-grade base metal mineralisation, investors may have expected better results.

According to CBE, shallow depth intercepts have found gold mineralisation of 1.4 to 3.1 grams per tonne.

Other metals, such as zinc and copper, showed good, high-grade mineralisation.

Where does this leave Cobre shares?

Like I mentioned, gold mining is a risky business.

It requires a lot of cash to keep exploration going and an investor base willing to front up the cash.

Thankfully for Cobre, it has both.

In mid-2019, Cobre secured a cornerstone investment from UK metals investor Metal Tiger PLC [LON:MTR] for a minimum of $2 million, giving it a holding in Cobre of almost 20%.

Metal Tiger is an experienced investor when it comes to mining explorers.

Having an institutional backer like MTR provides some cash flow security for CBE as exploration continues.

While today’s news was not overly exciting, given the uniqueness of the company’s venture, it could be worth keeping an eye on.

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Lachlann Tierney,

For The Daily Reckoning Australia