Study-stage Copper Projects
Hunting for scale and a near-term path to production
The world is hungry for copper and its appetite looks set to increase. A February 2022 report from Bank of America global research analysts forecast that the copper market will flip back to a deficit from 2025 onwards following the completion of the current wave of project buildouts. Vanessa Davidson, head of copper research at CRU, also sees as supply gap from 2025, with the majority of demand set to come from outside China, particularly in Southeast Asia and India, but also North America and Europe as green technologies and the transition to electric vehicles really start to take off.
Even in the near term, sluggish financial markets in May 2022 and widespread lockdowns in Chile failed to significantly dim copper’s shine, as the price of the red metal hovered around the US$4.00/lb mark after reaching record highs in early March. In addition to the expected supply gap and future demand being baked into the price, one of the reasons for copper’s performance has been the lack of exploration success in recent years and the lengthy timeline to move projects into production.
Two of the standout junior success stories of the last two years have been South American copper plays. In 2021, Solaris Resources’ market cap reached C$1.5 billion as it continues to advance its Warintza project in Ecuador. In May 2022, Filo Mining’s market cap rose above the C$3 billion mark on the back of remarkable drilling results at its Filo del Sol high-sulphidation epithermal copper-gold-silver deposit on the border of Argentina’s San Juan province and Chile’s Maricunga belt, showing grade and scale indicative of a major mine.
Speaking at the World Copper Conference in Santiago, Ragnar Udd, BHP’s president of minerals – Americas, cited the company’s recent C$100 million investment in Filo Mining as the type of early-stage entry that BHP is willing to make to grow its copper pipeline. However, the pertinent point about assets such as Filo del Sol and the reason they hold such a premium is their scarcity.
“Speaking to the investment community, there is a huge amount of appetite for exposure to copper but the playing field of potential companies for the market to talk to is small. Investors cannot find many projects which have a short timeline to production as well as the ability to be financed without partnering with a major mining company.”
Hayden Locke, President & CEO, Marimaca Copper
“There is a huge amount of appetite for exposure to copper but the playing field of potential companies for the market to talk to is small. Investors cannot find many projects that have a short timeline to production as well as the ability to be financed without partnering with a major mining company,” reflected Hayden Locke, president and CEO of Marimaca Copper (TSX: MARI).
Marimaca is currently advancing its namesake copper oxide project near Antofagasta with a heap leach SX/EW approach that means it does not need to desalinate water and will be able to process a refined grade A copper cathode, lowering project capex and putting Marimaca in the first quartile of global copper mine site emissions intensity.
Due to the company’s exploration success in 2021, management has had to adapt timelines to what it believes is likely a materially larger deposit, according to Locke.
“The original depth of the Marimaca oxide deposit (MOD) was approximately 250 m to 300 m, but the MAMIX drilling has potentially more than doubled the depth of the project, with leachable material at the bottom of the open pit,” detailed Locke, adding that it is an obvious focus to get into a resource that the company can then use in the DFS, which is expected in the second half of 2022. “This will allow us to both increase the scale of the project in terms of copper production and also the life of mine.”
Another of Chile’s advanced juniors is Hot Chili (TSXV: HCH), which reported a resource upgrade for its Costa Fuego copper-gold project headlined by a 67% increase in the total indicated resource and a 53% increase in the high grade indicated resource. Costa Fuego comprises the Cortadera, Productora and San Antonio deposits, all of which have updated mineral resource estimates and are close to one another at low-altitude elevations, 600 km north of Santiago. The updated resource totals 927 million tonnes @0.45 Cu Eq, but drill results released in April including 248 m at 0.8% Cu Eq at Cuerpo 3 suggests the potential for higher grade mineralization.
“This month (May 2022) we will start drilling out and expanding the high grade satellites of both Valentina and San Antonio where we just recently announced a maiden 4.2million t inferred open pit resource grading 1.2% Cu Eq,” said Christian Easterday, Hot Chili’s managing director, noting that access to a number of high-grade sources allows the company to design a project with short payback periods.
Hot Chili intends to deliver a combined PFS later in 2022 before project financing kicks off in Q1 2023. A bankable feasibility study is expected to be complete by the end of 2024, before a two-year construction timeline with first production in early 2027. From a corporate development standpoint, the company appointed Nicole Adshead-Bell to its board of directors in March 2022, who brings over 25 years of capital markets experience, and in the same month an offtake agreement with Glencore was announced for 60% of copper concentrate from Costa Fuego for eight years from start of commercial production.
One of the newer study-stage juniors active in Chile is World Copper (TSXV: WCU), which listed in January 2021 and owns the Escalones and Cristal projects in Chile, as well as the Zonia project in Arizona. The company released a PEA for Escalones in February 2022 showing a US$1.5 billion post-tax NPV and a 46.2% IRR at a US$3.60/lb copper price, with a payback of 2.18 years. Escalones is an SX-EW oxide heap leach operation, located 97 km southeast of Santiago and 35 km east of El Teniente, with an estimated US$438.4 million capex from construction decision.
Nolan Peterson, World Copper’s CEO, remarked that the resource included in the PEA for Escalones is only half of what the company believes to be the overall resource. He elaborated: “The other half has seen no historical drilling, but geologically it is clear that it is an extension of the main resource. There is also deep sulphide potential as well as three other copper porphyry skarn targets to the northeast that have never been drilled.”
Marcelo Awad, World Copper’s executive director, explained that most of the companies that held Escalones in the past were drilling very deep in search of a sulfide deposit, without paying sufficient attention to the oxide layer. He discussed the company’s exploration targets for 2022: “We also discovered an area of yellow color, our primary target called Mancha Amarilla, which we believe to be part of the main oxide deposit that has tremendous potential.”
Although Chilean mining is best known for its large operations, some companies prefer quicker start-ups that can fund exploration and development through the cash flow generated from small-scale production. Altiplano Metals (TSXV: APN), for example, runs the Falleron 5,000 t/month IOCG-operation located near La Serena, and is currently finalizing construction of its El Peñón processing facility (as of May 2022). The proceeds from this production are used to help fund activities such as underground development at the company’s Maria Luisa project and exploration and its Pastillas project in the Maricunga gold belt.
Alastair McIntyre, Altiplano’s president and CEO, spoke of the benefits of this business model: “Unlike most juniors, our focus on cashflow is to enhance understanding of our assets to catalyze further growth and this is a model that investors like.”
Image courtesy of World Copper Limited