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Caerus Shares, CMRS, Jump 20% On EV Metals And Absurd EU Rules

Tim Worstall
Tim Worstall trader
Updated 26 May 2022

Trade Caerus Minerals Shares Your Capital Is At Risk

Key points:

  • Caerus has singed a deal with EV Metals
  • EV Metals has just bought the Johnson Matthey battery supply business
  • The effect is to give Caerus a premium price for mined copper

Caerus Mineral Resources (LON: CMRS) shares are up 20% today on the news of a deal with EV Metals. This ties in with the disposal of the battery business by Johnson Matthey. It looks a good deal for Caerus, but it's driven by entirely absurd EU and trade treaty rules. The problem with those being that when the absurdity becomes apparent in prices then the rules might well change.

The Caerus background is very sensible indeed. We might think that as Cyprus has been mined for copper for millennia then there's none left. But exploration and extraction technologies continue to advance and often enough a good place to test the new techniques is in places we thought were mined out using old ones. That's exactly what Caerus Minerals is doing in Cyprus and they seem to be having some success doing so. Of course Caerus shares are going to depend, in the long run, on that insight actually fully working out.

But then comes today's announcement. EV Metals has just picked up the remains of Johnson Matthey's battery materials attempt. They've got it at what looks like a bargain price too. Nothing wrong with the tech, it's just that a large company like JMAT with large company overheads and speed of movement wasn't going to be a success in something fast-moving like battery materials.

Also Read: The Best Electric Car Stocks to Buy

EV Metals has now signed a deal with Caerus, which is nice and explains the share price movement this morning. Caerus, assuming that it produces copper in Cyprus, will provide that copper to EV Metals and that's grand.

But this is where we get to the absurdity of the EU's rules. This whole idea is driven by local content rules. Batteries, of course, go into cars. Automotive parts and components only have duty-free access across certain national boundaries if there's a significant local content. Part of that local content is the value of the metal that goes into making them.

The end result of this for Caerus is excellent. Being an inside the EU copper producer then means that they can gain a premium price for being an EU copper producer. Because components built from Cypriot copper are more likely to meet local content rules and thus be duty-free than those made from Zambian, Chilean, or other copper sources. Caerus will, therefore – that's the aim at least – be able to gain more than the world price per lb for their production as and when it comes to pass.

As we say, this is great for Caerus Minerals. It's an absurdity on the larger economic scale. Which is what makes it something that may or may not persist for the decades that Caerus is likely to be mining in Cyprus.

The effect here is that of course, a company should make the most of whatever the rules are. Premium prices for a commodity like copper are not to be sneezed at. But it's not always true that such carve outs persist when the true price of them becomes apparent more generally.

Tim Worstall
Tim Worstall is a freelance writer specialising in economics and the financial markets.