Weekly Reports | 10:00 AM
This week's In Brief explores a potential global copper growth platform, green shoots of an AI-led tech turnaround, and ambitious growth targets from SiteMinder.
- Cobre’s copper ambitions gather momentum
- Appen’s AI comeback gains traction
- SiteMinder eyes higher margins as AI reshapes travel
By Danielle Ecuyer
This week’s quote comes from Stephen Innes, The Dark Side of the Boom:
"What a difference a day makes. Wall Street’s post-election relief rally has turned into a full-blown technology liquidation, with hedge funds dumping yesterday’s purchases, long-only managers frozen at the controls and trading desks struggling to find anyone willing to stand in front of the selling.
"The blue wave has suddenly become a rather expensive lesson in the difference between buying the dip and buying the first leg of a much bigger correction.
"Indeed, the selling has gone from selectively dumping the AI high-flyers to carpet-bombing anything with a ticker symbol."
Cobre, burgeoning global copper play
Shaw and Partners has initiated coverage of Cobre ((CBE)), owner of two copper sites.
Sierra Atacama (62.86% control) is located some 50km from Antofagasta in Chile and is an operational underground mine with heap leaching and SX-EW (Solvent Extraction–Electrowinning).
These are two complementary processes used in copper mining to extract copper from ore and produce high-purity copper metal without conventional smelting.
The second site is the 100%-owned Ngami project on the Kalahari Copper Belt in Botswana, which is being developed as an in-situ copper recovery project.
Shaw flags the latter project could become a significant long-life, low-cost copper producer if successful technical results and permitting are achieved.
Sierra Atacama is believed to have a “credible” pathway to around 50ktpa production, while Ngami has the promise of a potential circa 40ktpa.
By way of history, Sierra Atacama was purchased in February, and ownership has advanced to the current circa 63% stake, with scope to increase to 100% via a US$68m option, which the analyst sees as likely by early 2028.
The September quarter evidenced an improvement in leach recovery of over 20% to around 78% with better mining practices. Alongside renegotiated supplier agreements, earnings (EBITDA) were positive in the quarter.
Enhanced utilisation, along with new third-party ore purchases, is supportive of higher production and earnings generation, the broker believes.
Notably, the copper processing plant is operating well below its installed capacity, with 818t of copper cathode produced in the September quarter, which equates on an annualised basis to around 3.3ktpa, well below the installed capacity of the SX-EW plant of around 20ktpa.
Management aims to lift production to around 8.4ktpa, or 42% of installed capacity, by 1Q2027. Based on management’s input, Shaw forecasts Stage 1 production of around 18ktpa by the end of 2027 and Stage 2 of around 25ktpa by the end of 2028.
The conceptual plan is to achieve an expansion to around 50ktpa from late 2029, Stage 3.
Stage 3 is underpinned by the sizeable resource of 734kt at 0.67%, which is seen as offering “high growth potential”. Existing permits and cash flow would assist with meeting the stages.
Regarding Ngami, lab recovery testing has returned around 30%-80% in-situ, with the analyst forecasting 36%. There is ongoing wellfield testing, which is seen as another risk element. Results are flagged for around late 2026, which could well transpire into a key catalyst and de-risking event for the stock.
Shaw sees significant upside from Ngami, estimating an unrisked NPV of $750m, with $188m attributable to Cobre’s 25% interest. Production could commence at 5ktpa in FY30, expanding to 40ktpa by FY34 at costs of US$1.00/lb net of by-product credits.
The broker believes the market attributes little value to Ngami, with technical de-risking a potential share price catalyst.
Research starts off with sum-of-the-parts net asset valuation of 86c per share. The stock is ascribed a Buy rating with an 85c target price.
Yesterday, the shares closed at 24.5c.
Appen's Phoenix moment
Appen ((APX)), once everyone's technology darling, is cautiously receiving some attention again.
Could its fortunes be changing?
Canaccord Genuity saw the company updating with a “strong” Q3 performance, including notable and material improvements in both revenue growth and profitability due to robust demand from frontier AI model developers, which continued to gain momentum.
Revenue advanced 34% y/y, and underlying earnings (EBITDA) before FX rose to US$10.3m from US$1m a year ago.
Revenue beat expectations by 3%, with earnings also better-than-anticipated due to outperformance from Appen Global.
Management pointed to 61% y/y revenue growth from the Chinese business, up 11% q/q, generating underlying earnings (EBITDA) growth of 101% to US$6.7m, albeit that was below the analyst’s forecast.
The miss was attributed to public holidays, the timing of some government rebates and investment in growth-related operating expenses.
The quarter’s annualised run rate is more than US$190m, up from US$175m in June.
Canaccord highlights growth came from generative AI projects and demand from Chinese technology companies expanding globally.
The standout surprise came from the Global division, with revenue up 17% q/q and 5% y/y, compared to a forecast decline of -5% y/y.
Underlying earnings (EBITDA) rose to US$5.6m from a loss of -US$1.3m in the prior quarter.
Two leading US frontier AI model developers were added as customers over the quarter, including a larger previous customer.
Appen is now working with seven of the eight largest US-based AI model builders and Canaccord sees ongoing pipeline opportunities.
Google was the last major customer to cease working with Appen in early 2024.
Potential for further upside remains, given several of these customers are at an early stage with Appen and expectations are for only “modest” revenue in 2026.
Margins lifted to 42.3% in the quarter from 39.2% a year earlier due to an improved mix of generative AI work and higher-margin prebuilt datasets.
The group’s underlying margin reached 13.9% in the quarter.
Appen is ascribed a Speculative Buy rating and a $2.60 target price.
Yesterday, the shares closed at $1.12.
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