Tiger Resources (TGS) is starting the New Year on a right foot with the stock jumping nearly 10% this morning on an improving outlook for copper in 2015.
The emerging Congolese-focused junior hit a more than one-month high of 17 cents during lunch time trade following media reports that commodity analysts are tipping a bounce in the price of the red metal this year after it hit a four and a half year low of $US2.84 a pound.
Growing concerns about slowing growth in China is taking its toll on sentiment towards copper but forecasters believe that demand will hold up and that the market is overestimating an increase in the supply of the industrial metal.
If that comes to pass, Tiger Resources will be the one to watch for its leverage towards the commodity. This "leverage" typically exists for higher cost marginal producers, which are nearly always small cap resource companies.
However, in Tiger Resources' case this isn't so as it is one of the lowest cost producers with a "C1" cash cost of $US1.56 a pound, which is set to fall in 2015 due to cheaper power costs. C1 is an industry term that includes mining, processing, site administration and logistics costs.
The leverage I am talking about is the miner's ability to expand its flagship Kipoi project. Management has put its expansion plans on hold in order to be prudent with its cash.
While the decision makes sense, it has unnerved investors as Tiger Resources recently conducted a capital raising to fund an accelerated expansion of Kipoi.
Then the miner did another raising and took on expensive mezzanine debt to buy the 40% of Kipoi that it didn't own. Tiger Resources needs to secure cheaper longer-term financing to repay the mezzanine debt in the coming months, and an improvement in sentiment towards copper would help a lot on this front.
These events have led some to question management's judgment and contributed to the big drop in Tiger Resources share price in 2014 with the value of its shares falling by two-thirds.
However, it's not management's operational performance that is being drawn into question. If anything, Tiger Resources has a strong track record in delivering on (and exceeding) project milestones.
If copper can recover to be comfortably above $US3 a pound and Tiger Resources refinances its short-term debt for a more favorable loan facility, the share price could easily double from here.
