De-Risking Without Reward: Market Inefficiency in Pre-Production Copper Mining : Evidence from Viscaria AB - Bridging Theory and Practice in European Mining

Sammanfattning

The global demand for copper is surging due to the ongoing energy transition and electrification, prompting policymakers to promote domestic production. Despite these ambitions, mining companies in the pre-production phase face substantial challenges in securing financing, valuing projects under high uncertainty, and achieving rational market recognition of de-risking milestones. This thesis examines these interconnected issues through a mixed-methods single-case study of Gruvaktiebolaget Viscaria AB and their brownfield copper mining project in northern Sweden. Combining quantitative event-study methodology using the Fama-French Three- and Five-Factor models with qualitative semi-structured interviews conducted with executives, the study investigates the core areas of: project financing and the Equity-to-Debt transition, project valuation practices under uncertainty, and stock market reactions to key de-risking milestones of environmental permitting, feasibility study release, and debt mandate announcements. The findings reveal that Viscaria AB maintained a strongly equity-dominated capital structure during most of the pre-production phase, consistent with the Pecking Order Theory under conditions of information asymmetry. A gradual shift toward structured debt financing only became viable following significant de-risking events. Valuation was managed through iterative, adapted processes centered on the Feasibility Study, with upside assumptions of the copper price and future currency hedging with lending banks. However, the most important conclusion that this thesis provide is that capital markets exhibited limited rationality. Market reactions, examined by Abnormal- and Cumulative Abnormal Returns, to major de-risking milestones, were generally modest and statistically insignificant. The results provide stronger support to the Adaptive Market Hypothesis than to the Efficient Market Hypothesis in the context of junior mining equities. This thesis contributes to the literature by providing empirical evidence on financing dynamics, valuation practices, and market efficiency in the underexplored pre-production phase of European mining. Practically, the thesis offers valuable insights for mining executives, investors, and policymakers on the challenges of bridging the financing gap and improving market communication.