Early-Stage Copper Projects
Market volatility does not dampen enthusiasm
Despite significant enthusiasm for copper early in 2023, copper prices in the early spring have fluctuated drastically in response to global financial uncertainty. Chaos across the economy, triggered by the collapse of Silicon Valley Bank and the emergency merger of UBS and Credit Suisse, led funds to dump their bets on high copper prices. Despite positive projections for copper from Goldman Sachs and others, fund managers fell victim to fear of contagion radiating out of the banking sector and cut their exposure to copper.
However, this temporary shorting of copper did not last. By March 28, investors’ fears were assuaged by the announced buyout of Silicon Valley Bank by First Citizens and a larger calming of the international banking sector. On New York’s Comex market, copper reached US$4.11 per pound (US$9,042 /t), while on the Shanghai Futures Exchange it reached US$5.07 per pound (US$10,135 /t).
These fluctuations are no surprise to industry leaders interviewed for this report, but copper projections are overwhelmingly positive. “Over the next six months, we will see some price fluctuation in copper, most likely in the range of US$3.85 to US$4.50 per pound,” said Alastair McIntyre, president and CEO of Altiplano Metals. “Once the Federal Reserve makes its decision to stop or slow the pace of rate hikes, then you will see the US$ further weaken and copper prices back over US$4.50.”
Pampa Metals (CSE: PM) recently closed on a US$2.2 million raise, enabling the company to drill its priority project, Block 4. For the company, which has a portfolio of seven projects, Block 4 and the Buenavista Target have become their priorities. As Pampa drills, it is participating in the essential contribution of junior companies to the country – greenfield exploration. In recent years, majors have almost exclusively focused on brownfield exploration and expanding their existing mines. “The unwillingness of large producers to explore afield is why I think junior explorers are essential – they are focused on the early stage of exploration and the pre-discovery or immediately post-discovery,” said Tim Beale, vice president exploration at Pampa Metals. Torq Resources (TSXV: TORQ) has been very busy in 2022 and the first half of 2023 at its Margarita iron-oxide-copper-gold and Santa Cecilia copper-gold projects. At Margarita, Torq conducted its first drill program on the property, making a discovery of 0.94% copper and 0.84% g/t gold, which extended to 800 m long in a second drilling program. At Santa Cecilia, a project that has historical discoveries from decades ago, they put boots on the ground to prepare for drilling and targeting in December 2022. At Santa Cecilia, the company plans a total of 15,000 m as part of the first phase of drilling, to reach completion by May of 2024, while at Margarita it intends to drill an additional 4,000 m starting in June of 2023. “The company is planning to have a drill turning more or less continuously for the next 12 – 14 months,” Michael Henrichsen, chief geological officer, stated.
Atex Resources’ (TSXV: ATX) Phase II drilling program was a proof of concept, yielding 1,160 m at 0.78% copper equivalent, including 550 m at 1.03% copper equivalent, and the on-going Phase III has been about expanding the company’s knowledge of the resource and expanding the size. The company is 12 holes into the deposit, and all are significantly mineralized. “We will probably require between US$50 to US$100 million to get the project towards a pre-feasibility study,” said Craig Nelsen, board chair of Atex Resources. “Still, this project is a fairly rare beast in terms of its grade tonnage curve, which makes us a likely acquisition target,” he added.
Raymond Jannas, Atex’s CEO, explained: “In the short term, we will continue drilling and deepening our understanding of the size of the deposit. It would be helpful to have a strategic partner with the view of taking this forward.”
The company, aware of the strength of its offering, is actively working to move it forward. Despite discussion of low ore grades and more challenging geology across the industry, it is clear that there are immense copper reserves in Chile waiting to be exploited.
Concessions landscape in transition: Law 21,420
In November of 2022, law 21,420 was submitted. Although covering several areas, the law would primarily impact the mining industry by changing the concessions system. At the moment, companies pay an annual payment for a patent with the right to explore or exploit. The changes would increase the grant term from two years to four years; however, renewal would no longer be an option. Although patents would remain indefinite, there would be stronger requirements for the companies to demonstrate that the value of the patent was being increased. Additionally, the amount of the license would increase from 1/50 Universal Transverse Mercator (UTM) to 3/50 UTM. The value of licenses is maintained only for those that demonstrate effective work.
The Cámara Minera and smaller mining players have come out strongly against the law. Zauschkevich Domeyko, president of the Cámara Minera, stated: “Multiplying the value of the patent by four would imply the bankruptcy of small mining and would put medium mining in trouble. Although we were able to get the authorities to postpone the implementation of this law for one year until 2024, there is still a need for further discussion on these issues.”
Tim Beale, VP exploration at, Pampa Metals highlighted the potential impact of the law, saying: “The increase in fees for maintaining ground represents a significant further increase in costs, which will be problematic because some companies will simply not be able to afford to pay those fees.”
“Distinct alteration, mineralogical and elemental values, patterns, and ratios can now determine where you are in a porphyry copper molybdenum mineralizing system. Computer modelling using proprietary algorithms have been developed using this research.” Tony Harwood, CEO, Montero Mining and Exploration Ltd.
The risk that the increase in fees could lead certain juniors to failure is a legitimate one. However, although the law would be challenging for exploration companies, many members of the mining community see it as a step forward. Alicia Domínguez, mining and energy leader at Ernst & Young, argued: “The changes may be positive in certain aspects because the current legislation allows people to hold onto the land without exploring.”
Indeed, Henrichsen, chief geological officer at Torq Resources, described Chile’s land tenure system as one of the barriers to entry in the country: “One of the ways the government could incentivize exploration would be to require companies to spend money on their ground to fulfill set work expenditure requirements instead of allowing land to remain dormant for long periods of time.”
Chile has been the world’s largest copper producer for a very long time, but it still has significant land with high potential for important discoveries. This modernization of the law could help combat Chile’s productivity problem. “The biggest challenge is increasing production,” Domínguez said. “There will not be new mining projects if we do not incentivize exploration. So, these changes in concessions may be an incentive for new exploration.”
Article header image courtesy of Torq Resources