Title:   A New Copper Position — Kicking over an invisible gem
Show:    Paulo Macro (Substack) — paid
Guest:   Paulo Macro ("Cloudbear")
Date:    2025-DEC-04
URL:     https://paulomacro.substack.com/p/a-new-copper-position
Length:  written post (no timestamps)
Note:    Back-filled post (processed 2026-JUL-07; predates most of the source's archived posts). Introduces Surge Copper (SURG.CN) as a new advanced-exploration copper-junior position — the origin note for the SURG holding later revisited (Jun-15 Berg PFS). Applies his mining checklist and walks the Berg/Ootsa valuation. Body reproduced for personal study; Substack chrome removed.

In my ongoing efforts to find appropriate expressions that can leverage my bullish copper view (most recently discussed here, here, and here), I recently had the good fortune of meeting a management team introduced to me by my pal The Koala, and believe I have found another compelling, well located and managed, catalyst driven, and absurdly cheap advanced exploration copper junior (especially in a $5-7/lb copper price environment, although admittedly in that range a lot of juniors look compelling).

Important: Like most names in the copper space, this stock had a good run recently. It is on the small side of small/microcap, so liquidity is low. I would implore readers to keep this in mind and not just mindlessly scramble into the situation as it only trades US$200k per day. I have an initial position and plan to treat this as a long-term investment, but my own personal circumstances are subject to change without notice. And most of all — do not treat any of the below as financial advice, but rather as a learning opportunity as you look around the sector to compare/contrast, build your own models and develop ideas in the sector. I also cannot confirm nor guarantee the exactness or accuracy of every detail below, so for heaven's sake go easy and do your own work first! Full disclaimer here.

Reviewing what I look for in the mining space, the list of what matters in a very challenging sector is really simple:
- Jurisdiction
- Jurisdiction
- Jurisdiction
- Management Track Record
- Alignment (backers, skin in the game)
- Asset (or Portfolio)
… in that order.

With that, here's the idea…

Surge Copper (SURG.CN, C$0.34)

Surge is a Canadian copper junior explorer that I believe touches all six points above. One quick way to get up to speed would be to watch the latest 15min video presentation from CEO Leif Nilsson in September. I encourage you to read through the latest presentation as well.

Sparks notes:

Market cap C$130mn fully diluted (~$100mn); ADTV ~$200k — small.

Jurisdiction: British Columbia, Canada. Historically BC has proven more challenging politically and economically for advancing mining projects versus jurisdictions like Ontario or Saskatchewan. This history has given investors pause. However the winds in Canada are clearly shifting toward a more pro-growth, pro-critical minerals direction since Trudeau left and Carney took over. The Golden Triangle in northern BC is isolated, rugged, and higher cost, but Surge's portfolio of assets is located farther south in central BC in proximity to existing infrastructure (roads and ports) as well as cheap hydropower, in a relatively economically less-developed area. If we were to see full alignment between locals/First Nations and the provincial government (which all seems to be coming together over the next 1-2 years), this area could prove to be an attractive district. Proximity to the Pacific Ocean and local infrastructure is key to the story.

Mgmt:

Leif Nilsson (CEO): polished, understated nuts-and-bolts operator — a steady hand on the wheel. Former banker with Macquarie, Stifel, and CIBC in mining M&A and capital markets with a deep rolodex of industry contacts.

Christian Kargl-Simard (Chairman, "CKS" for short, also serves as CEO of Blue Moon Mining): built the portfolio via farm-ins cheap during the downcycle in late 2020 with copper at ~$3/lb. Knows how to promote the story.

Nilsson and CKS previously worked together on Adventus Mining (CKS was CEO, Nilsson was a board member). Adventus was developing a copper/gold project in Ecuador which they sold for C$200mn to Silvercorp in 2024. The timing of the copper cycle then was not ideal and jurisdiction issues with Ecuador were a clear headwind, but I like that management was able to advance it to a transaction. They have a track record of developing an asset for sale.

Dr. Shane Ebert (VP Exploration) — 25yrs experience in the district with their Ootsa asset, as well as being involved with the Bahuerachi copper discovery in Mexico.

Mark Wheeler (VP Projects) — experienced in scoping, permitting, and First Nations discussions. Previously worked as a mining engineer at Teck's Quebrada Blanca and Barrick's Hemlo, so he has played in the big leagues.

Summary: The management team has relevant experience.

Alignment:

Float = 345mn shares + 33mn options/RSUs = 378mn fully diluted

African Rainbow Minerals = 19.9%. AFM is a US$2.3bn listed South African diversified miner with investments in base metals and PGMs. I think of AFM as a South African version of South32 (BHP's former base metals division). AFM anchored the last C$10.5mn capital raise at 17.5c which closed in September 2025, raising their stake in SURG from 14% to 20%.

Centerra Gold = 10%. Centerra owned the original SURG flagship asset "Berg" via their subsidiary Thompson Creek Metals (Centerra bought TCM in 2016 for $1.1bn).

Management & Board = 10%.

Institutional + retail = 60%.

Assets: 100% ownership of a vast 142k hectare contiguous land package which includes their primary Berg asset as well as Ootsa (Ox and Seel deposits):

Asset #1 — Berg: SURG released a PEA on Berg over two years ago in June 2023, valuing the asset at US$1.5bn (NPV8%) for an IRR of 20% using a $4.00 Cu, $15/lb molybdenum, $1800/oz gold, $23/oz silver.

US$1.4bn initial capex with 3.9yr payback on a 30-year mine life producing ~191MMlbs/year CuEq, with a low strip ratio of 1.1.

Mineral resource of 1Bt M&I + 500MMt Inferred grading 0.38% CuEq, containing 5.1bn lbs copper, 633MMlbs Mo, and 150MMoz silver.

C1 cash costs including byproducts of US$0.46/lb, AISC $0.82/lb.

Note: the big pushback on the asset is the grade, but investors overlook that the operation would be low cost while the molybdenum content is very high. Moly byproduct is key to economics — moly has been trading between $20-25/lb over the past few years, and is a key steelmaking/superalloy ingredient (~650MMlbs of annual global consumption).

If Berg were in operation today, it would be a top 5 copper mine in Canada (55-60ktpa), plus the largest moly byproduct producer by nearly an order of magnitude vs operations like Teck's Highland Valley.

At $4.25 Cu and $18 Mo, Berg's grade moves to 0.41% CuEq which is in line with long-life porphyry assets globally.

At $4.80 copper (spot $5.35) and $19.50 Mo (spot $22), the NPV8% rises to US$2.5bn with a 27% IRR (note shaded values below are in CAD$).

Asset #2 — Ootsa:

Outdated resource estimate from Feb 2022 delineated over 400MMt grading 0.32% CuEq.

As with Berg, the initial pushback is around lower grades, but the appeal is that the Ootsa assets are located only a few miles from the mothballed Huckleberry project owned by billionaire Murray Edwards's Imperial Metals (III.CN, C$1.4bn). Huckleberry's mill can process 90kt/day of material and is expandable to 120ktpd, but was put on care & maintenance in 2016 due to low metal prices. Because Huckleberry only has ~5-8 years of mine life left, the Ootsa and Berg assets are a natural fit for sourcing material while leveraging existing infrastructure in a low-cost manner.

Balance sheet: C$10mn in cash, no debt, fully funded through at least prefeasibility (PFS), which is due in March-April 2026.

Relevant history: Company was formed in 2020 with a C$6.5mn raise at ~11c along with $8mn from Centerra Gold. SURG has conducted over 20km of drilling since 2020 on a total C$40mn of capital raised, leveraging low district drilling costs of $170-180/meter.

Catalysts: The big one is delivery of the prefeasibility study (PFS) in mid-1H26 (let's call it April). Thereafter a bankable FS would be targeted sometime in 2027 at a cost of $10-15mn which would require more capital, but management can explore strategic options and be creative as they have demonstrated in the past. Given the drilling since the 2023 PEA and the use of $4/lb Cu and $15/lb Mo then, I think we can expect not just an improvement in economics from the current ~US$1.5bn baseline NPV but also a notable increase of the resource size. The delta is hard to estimate, but based on the quantity of drilling over the past 30 months and a conservative 10-15% re-racking of the price deck, I might expect cutoffs/grades to improve the overall resource by maybe 30%, perhaps more?

Math: Market cap of US$100mn for 100% interest in all properties within a prospective package. Berg alone is worth US$2.5bn+ (which could land closer to US$3bn on an expanded resource) assuming $4.80 Cu and $19.50 Mo. None of this factors in Ootsa's strategic value/proximity to Huckleberry, or surrounding exploration prospects — that all comes free. So the stock trades ~3% NAV on Berg. Although all copper equities have moved quite a bit in the past several weeks, this table gives you a general idea of where Surge falls.

Bottom Line

A valuation of ~1.5c/lb recoverable CuEq in the ground (2-3% NAV) simply does not make sense based on what we know of SURG's portfolio, particularly with discrete catalysts coming in the first half of 2026 via a PFS that could add significant value to a district-scale package run by a management team with a past track record for exploring and selling a base metal asset. I have a position in the stock — but again, please note my disclaimer at the top.

I look forward to your feedback, thoughts, and any perspective on this one!

As always, kindly yours,

Paulo aka Cloudbear