Title:   Update on my Largest Copper Position — When a Door Closes, a Window Opens...
Show:    Paulo Macro (Substack) — paid
Guest:   Paulo Macro ("Cloudbear")
Date:    2025-NOV-26
URL:     https://paulomacro.substack.com/p/update-on-my-largest-copper-position
Length:  written post (no timestamps)
Note:    Back-filled post (processed 2026-JUL-07 on request; predates the source's other archived posts). Aldebaran Resources (ALDE) update after Rio Tinto's Nuton walked away from its staged earn-in — the -30% overreaction, why Rio (not the asset) is the problem, and why Rio's exit puts ALDE in play for 2026 M&A. Body reproduced for personal study.

It's no secret I'm a bull on commodities, and in particular base metals and uranium. No need to review the myriad reasons why. Suffice to say that, in copper especially, I think we are about to see a significant wave of M&A that cleans out the "middle" among junior producers and select advanced explorers before the mania of flying garbage really gets going, which is something I discussed recently in The Three Phases of a Mining Bull.

While I occasionally move around in the underlying commodity (generally futures and related options), from the perspective of expressing my view, there certain things I look for in seeking asymmetry by torquing the upside amongst junior producers and explorers while trying to limit the downside — a process I discussed in detail when I first presented my largest copper exposure back in October 2024.

I later followed up on this in When Macro & Micro Stars Align in February.

A few weeks ago, my largest copper equity position — Aldebaran Resources (ALDE.CN, C$3.00, US$400mn mkt cap fully diluted) released the initial economics around their flagship Altar project with a Preliminary Economic Assessment which delineated on $4.35/lb copper and $2500/oz gold:

An NPV(8) of US$2.0bn for a 20% IRR;

48-year mine life with a $2.02/lb cash cost (AISC $2.59/lb);

4-year payback on $1.6bn capex;

At spot $5/lb Cu (the current long-term Street price) and $4k gold, the NPV(8) goes to US$3.3bn for a 28% IRR with a 2.2 year capex payback.

Reviewing some key points:

The resource today stands at 32B lbs Cu and 6.8MMoz gold (~70% M&I, ~30% Inferred). Needless to say, a large, generational asset of ~50 years with 30bn+ lbs copper grading 0.4% is rare.

Keep in mind Aldebaran owns 80% of Altar, with the other 20% owned by gold/PGM miner Sibanye Stillwater which was the original owner and staged in ALDE's ownership via milestones over the last several years.

ALDE stock is owned by:

Route One (SF-based private equity) — 44%

South32 (BHP's former metals division spun out a decade ago) — 15%

Sibanye Stillwater (gold/PGM miner) — 14%

Management — 5%

One year ago in Nov24, ALDE signed an agreement with Nuton (a subsidiary of Rio Tinto) which agreed to pay $10mn at signing (done), $20mn with an updated Mineral Resource Estimate (done), $30mn after the Preliminary Economic Assessment (the recently released report), and $190mn after a Prefeasibility Study (PFS expected at the end of 2026), for a total of USD$250mn in payments. In exchange for making every payment, Nuton would receive 20% of the Altar project, leaving Sibanye with 20% and ALDE with 60%.

What is Nuton? Nuton is a subsidiary of Rio Tinto which is focused on developing a portfolio of proprietary copper bio-heap leach technologies designed to treat primary sulphide ores and other "difficult" copper materials (waste, tailings, complex ores) at higher recovery rates than conventional heap leach (basically applying microbial bugs to soil and speed up the natural leaching that mother nature does over a few million years). The technology is Rio's response to Freeport/BHP's Jetti technology. The idea with these approaches is to eventually try to turn 0.1-0.2% Cu grade tails into economic deposits, while also potentially lifting the economics of greenfield ore bodies that have undesirable content like arsenic or face restricted water access. Nuton has signed several agreements with other juniors like Arizona Sonoran (Cactus), Excelsior (Gunnison), and Regulus (AntaKori) to test their technology.

In a surprise move, Nuton this weekend decided not to proceed with their next payment of $30mn and walked away. ALDE stock initially fell over -30% in a massive overreaction on Monday (for which I channeled my inner Shrub and gave thanks, filling several bids in the $2.60s), and has since stabilized in the $3.00-3.10 area. The volume was historic — over 1.3mn shares traded Monday and another 300k Tuesday. Despite the volatility (the stock is currently -23% from its all-time highs), ALDE sits exactly where it closed on October 8th, and is +60% on the year.

I spoke with CEO John Black and the IR team on Monday morning to crosscheck my own thoughts. What follows are my own conclusions, and I am not speaking for management or putting words in their mouths in any way. Most of the points I describe below are my own assertions and educated guesses. If you want management's take, please refer to the press release and reach out to their Head IR Ben Cherrington. I also see my buddy Trevor Hall at Mining Stock Daily has interviewed CEO John Black this morning — I don't see it on the website yet but you should be able to see it on Apple podcasts. And as always, nothing here is investment advice — just my own thoughts and perspective.

Why did Nuton walk?

Nuton technology has no obvious edge at Altar. The PEA outcome was expected to be notably higher for a Nuton Altar leaching operation compared to a traditional mining plan. It ended up being a wash — slightly more cashflow, slightly lower NPV — meaning Nuton has no significant edge at Altar. Remember Nuton is a subsidiary of Rio Tinto and is run by Rio's former head of acquisitions, suggesting that Rio management perhaps intend for Nuton to be something of a "Google Area 120" incubator: find deposits where Nuton tech works, and fold those into Rio. It stands to reason that if Nuton doesn't move the needle, they move on. Still, even without Nuton, it seems pretty shortsighted that Rio wouldn't pay $30mn to see the PFS on a US$2bn ~50-yr district-scale copper project in a jurisdiction that is starting to heat up like Argentina, unless there's something else going on. Some investors clearly assumed on Monday's open that this "something else" meant something is wrong with the asset. Which brings me to Point #2…

Rio Tinto seems lost. CEO Simon Trott took over three months ago, and I've seen and experienced enough CEO transitions to know that when a corporate lifer from operations takes over the C-suite, the temptation is to prove he can play with the MBA/PE boys at their own game and make some ruthless, tough decisions. The easiest thing a new CEO can do is start cutting costs. Despite Rio's script about focusing on growing iron ore, aluminum, and copper, the cost cutting at Rio has been unmistakable. A few examples:

Just last week Rio mothballed the Jadar lithium-borate underground greenfield project in western Serbia. Jadar would have been one of Europe's largest Li mines at 55-60ktpa, and Rio has sunk ~$700mn into what would have been a $2.5bn+ investment. Now it's gone.

Rio has refused to exercise pro-rata rights on Arizona Sonoran where Nuton is also being tested.

Rio has supposedly enacted an internal travel ban for employees (word gets around — mining is a small world).

Rio Tinto is one of the largest mining companies in the world, but ~#9 in attributable mined copper production. If Teck and Anglo successfully merge, Rio will fall further down in the rankings — and copper isn't a fringe metal. Even though Nuton didn't exceed expectations, the only reason why Rio wouldn't pay $30mn to see a PFS is if Rio is putting the screws on costs to Nuton as well. Rio is not investing, so Rio won't grow — and they are counting on technology to move the needle (there's a lot of that going around outside mining these days too — I'm looking at you AI), but the technology is not working as expected, so the tech division also responsible for scouting future growth is forced to cut costs and retrench. I think it's worth keeping all this in mind when considering who benefits from the next leg of the mining cycle. Rio will be back buying assets for growth — all the big boys always do — only it will be later… and higher.

There are several things on my mind here:

There is nothing wrong with this asset, and everything from the PEA stands.

The initial Nuton agreement was a master stroke for ALDE at a time when the capital markets for junior miners were largely closed, and the copper price was in a very different spot a year ago ($4/lb vs $5/lb today). ALDE management pulled a rabbit out of the hat by getting Nuton to fund $30 million of drilling and a PEA that demonstrates a $2bn+ mine (which exceeded my own ~$1.5bn valuation expectations). Nuton got nothing in return for their US$30mn sunk cost when they decided to pull out this week. A wise trader likes to say: we give thanks.

The initial optics of Nuton pulling out were not great, and probably resulted in some investors assuming there must be something wrong at Altar. As discussed above, I think there is something wrong at Rio. I've been to Altar, I've seen ALDE's operations (best practices down to the gritty details), and I trust the management team's track record and the alignment.

The Nuton news was disappointing, no denying it. Nuton's $30mn PEA payment was the necessary bridge to the PFS, and that's gone. That bridge must now be rebuilt.

ALDE has many levers to pull to procure capital for a PFS that doesn't necessarily involve an equity raise. My buddy The Koala suggested to me that maybe even a 0.5% net smelter royalty could be signed quickly by a streamer or private equity for instance, and this would put to bed any questions about the asset in one fell swoop. Management has options today they didn't have a year ago.

The company has $10mn in cash, and management knows how to stretch a dollar. I've watched their expenditures over the past 3 years, and while Argentina isn't as cheap as it once was, $10mn buys a fair runway, and these guys don't need to run out and raise money tomorrow. Yes, there is a ~$20-30mn capital need here to complete the PFS and fund the company through early 2027, but this is money that can be raised in 3-6 months, not now. To demonstrate how far this management can stretch a dollar, the last raisings were all done via non-brokered via private placements in Sept23 (C$20.5mn) at a premium to the market price at 88c (South32 paid C$1.01 for most of their pro-rata in that deal), C$6mn in May23 from 70c warrant exercises belonging to management and Route One, and a C$14mn entry investment by South32 in August 2022. Any junior that delivers a $2bn NPV PEA burning only C$30mn of raised equity capital in a 2-year timeframe is… rare. Thank you again Nuton for your $30mn contribution to the good and the welfare.

Now I'm going to reach a little, but I can tell you from experience that I have seen things like this happen to good management teams with good assets when a situation takes a sudden left turn.

The problem with the Nuton deal was always that Rio would end up a 20% owner of Altar after staged payments of $250mn to ALDE, which means Rio would be in the driver's seat on any M&A and possibly discourage other strategic bidders (e.g.: South32, neighboring Glencore at El Pachon, the Chinese, strategic/SWFs, myriad other gold/copper majors). If Nuton had worked, why would a competitor launch an offer for ALDE if Rio could just come over the top with a counter? Even without a blockbuster Nuton result, Rio could have gone the full stretch to the PFS and received 20% of Altar for $250mn, which in theory put a value on ALDE at a much lower implied valuation than the PEA (~$6/share = 60% of Altar + cash, measured at the $1.25bn Nuton implied deal valuation of $250mn for 20%)… but unfortunately Nuton's deal also put something of a ceiling on ALDE if nobody else would pay more with Rio hanging around. The other wrinkle is you have Sibanye which owns 20% of Altar (although they are likely an eventual seller). Does BHP or Glencore really want to end up owning 60% of Altar alongside 20% Sibanye and 20% Rio? It's a headache to deal with one partner, never mind two.

My biggest question to ALDE management since they signed the Nuton deal was "how do you plan to maintain competitive tension in the room with Rio there?"

Well, Rio paid for Aldebaran's PEA, and now Rio is out of the way. ALDE owns 80% of a world-class asset in a district-scale locale, in an excellent jurisdiction at a time when Argentina is attracting significant attention and political risks are greatly diminished following Milei's performance at the recent midterms. Such a prime asset is now up for grabs just when copper is potentially re-racking to a new price deck.

Before the Nuton news, I assumed I had to wait until 2027 after the PFS to see Aldebaran taken out. With Rio out of the way, I think ALDE is in play in 2026 and the market does not realize it. Think about it — if you're a possible buyer of ALDE and you wait for the PFS to come out in a year, you're likely going to see $5/lb copper used in the study since that's the long-term price now. Which means Altar goes to $3.3bn NPV just on the copper price assumption, and ALDE's NAV goes from being worth $1.6bn to $2.6bn. ALDE is trading at 0.15x NAV at $5/lb copper before factoring in whatever financing they need to do in the interim. Why not just buy ALDE and do all the scoping and a Feasibility Study your way? Why not team up with Glencore at El Pachon down the road like Filo did with Jose Maria? One road, power line, and water supply is cheaper than two…

As a large shareholder of ALDE, I obviously come with my own biases, and nobody likes a drawdown. As I said on the chat: we all take our lumps. Welcome to being a value investor in the mining industry. But when I step back here, I see a lot of possibilities. At <$400mn mkt cap and ~0.25x current NAV using $4.35/lb Cu and $2500/oz gold, I'm personally a buyer rather than a seller. Each of us has to decide what to do and play our own hand — and none of this is financial advice. But I do enjoy opportunities when the market runs away with things I have a different view on.

I wish you and your family a restful, fulfilling Thanksgiving! For my part, I am grateful for all the support you have shown me, and I look forward to another year of piecing together, sharing, and discussing ideas with you!

As always, kindly yours,

Paulo aka Cloudbear