Copper Exploration
Looking for American copper
The copper price began 2023 on a positive note, reaching a peak of US$4.28/lb in January amid optimistic expectations for a robust rebound in Chinese demand. However, prices then followed a consistent downward trajectory until October, when they dipped to around US$3.54/lb. Subsequently, copper experienced a recovery. The pressure on copper prices may have intensified due to the impact of rising interest rates and persistent concerns about the Fed's policy. These factors contributed to a rally in the dollar, thereby increasing the cost of raw materials for buyers in other currencies.
There is no doubt that the fundamentals for copper are solid, especially in the US: The world needs to electrify its energy sources, a deficit is looming, and the DOE has designated copper as a critical material. So, why has the market been so challenging? According to Joshua Olmsted, president and COO for the Americas at Freeport-McMoRan, the reasons we saw fluctuations and variability in the copper price on a short-term basis is that the Chinese economy has been struggling, having a downward pull on the copper price and the EV market, and electrification and infrastructure projects are taking off at a faster pace than expected, putting upward pressure on the copper price.
While executives from companies with developing projects and a strong market capitalization emphasize that it is essential to maintain a broader perspective on the long-term dynamics of copper fundamentals, it seems that short-term considerations have blinded investors, and 2023 proved to be a tumultuous year. "It is a great challenge when you have a market where people are uncertain about inflation, interest rates and geopolitical conflicts. In these scenarios, investors tend to go to cash as they do not want to take market risks. Even though the fundamentals for copper are phenomenal and better than ever, investors are still holding off on putting money into the market due to significant risks," elaborated Dan Weir, co-founder and CEO of Copper Bullet Mines.
Capital remains a constant concern for junior companies, which are often perceived as ‘cash-burners’. This cyclically restricted flow of funds into the market could have lasting effects, particularly on the timelines of bringing new mines online in the future: Without exploration, there are no mines.
Weir considers that the current complex scenario in the mining industry is a double-edged sword. On the one hand, it presents the best time to acquire assets as market valuations are low; however, on the other hand, companies face challenges in raising capital. This is a dilemma that Copper Bullet Mines faces, as it considers additional acquisitions in the Arizona Copper Triangle while aiming to raise approximately US$5 million for drilling to build out the oxide mineralization at the surface of its Copper Springs project to bring the historical resource to a 43-101 compliant state and test deeper holes to see if there is a deposit at depth. Copper Bullet Mines owns the Copper Springs and Gibson projects, which join each other and are essentially one project of approximately 9,000 acres at the heart of the Copper Triangle, surrounded by Resolution Copper, Capstone Copper's Pinto Valley, South 32, Asarco, Freeport-McMoRan, and KGHM. The historical open pit resource from Copper Springs boasts 47 million t at around 0.4% copper. However, Weir sees significant upside potential and compares it with Resolution Copper: "The Resolution mine to the southeast of Copper Springs will be the largest in North America once it gets into full production - it is almost 2 billion t, grading about 1.5% copper. However, the Resolution deposit is deep, making it expensive to mine and put into production. Fortunately, we have a historical open pit resource of approximately 47 million t at about 0.4% or approximately 400 million lb of copper. There is also significant potential to find higher grades deeper, as the deepest hole drilled on the Copper Springs project is only approximately 500 m; the Resolution deposit next door starts at about 1,500 m," he explained.
Idaho Copper is a company that finds the market challenging, especially in Canada. Andrew Brodkey, COO of Idaho Copper (IC), explained that the saturation of the Canadian market with mining companies posed a challenge for IC to distinguish itself. Additionally, the stringent regulatory reporting requirements in Canada contributed to the decision to cut ties with the northern neighbor and separate from its parent company, American CuMo Mining: "The US market is orders of magnitude larger than Canada, and investors are less acquainted with mining companies, offering better investment opportunities. Lastly, we emphasized our status as a US company, operating from and headquartered in Boise, Idaho, and not subject to foreign control. This decision also stemmed from a perceived negative connotation associated with foreign ownership of US properties," Brodkey argued.
IC operates the CuMo project in Idaho, with a current M&I resources of almost 4 billion lb of copper, 1.6 billion lb of molybdenum, and 170 million oz of silver. When asked about the potential of the deposit, particularly given its low-grade nature, Brodkey highlighted the significance of ore sorting, an approach that has reduced the need for a large mill and minimized tailings, and emphasized that the mineralization is contained within narrow stock veins: "Thin veins carry the minerals, making it easier to differentiate between veins containing metals and the surrounding gangue (waste) material. This deposit type lends itself to efficient processing using ore sorting, a technology that has gained prominence in recent years," continued Brodkey.
IC expects an updated PEA by Q1 2024, reducing the project capex to approximately US$1 billion (US$ 2 billion less than the 2020 PEA) with a 25-30,000 t/d mill.
New ways of doing business
Junior companies in the US are exploring new business models where partnerships among juniors or producers take precedence. "Typically, juniors focus on individual resources and strive to be the first to bring them to fruition," said Morgan Lekstrom, Blackwolf Copper and Gold CEO.
Blackwolf Copper & Gold is a Vancouver-based company that operates in the Golden Triangle of Alaska, with a particular focus on the Cantoo project, which boasts a 30-m-wide vein rich in gold, silver and copper, and Niblack, a copper-gold-zinc-silver project located on Prince of Wales Island in southeast Alaska. The company signed a Memorandum of Understanding with Dolly Varden Silver, New Moly, Goliath Resources and Coast Copper to explore the feasibility of utilizing New Moly's Kitsault project as a potential location for a centralized polymetallic processing facility by feeding Kitsault's mill with ore from their projects in British Columbia. In the case of Blackwolf, ore from its Niblack project in Alaska would also be included. Through this shared mill approach, the companies can collectively optimize the use of resources. "This hub and spoke model offers immense potential, particularly for projects that may be orphaned or stranded individually but collectively poses significant resources. By linking multiple companies, the possibilities expand and capital requirements are reduced," explained Lekstrom.
Another emerging collaboration model is an informal consortium of companies that pool resources below the same CFO level, allowing for a shared financial officer overseeing the different companies. An example of this approach is the Metallic Group of companies comprising Metallic Minerals, Stillwater Critical Minerals and Granite Creek. This model enables companies to maintain independence while leveraging a diverse skill set similar to that of a mid-major or mid-tier producer, allowing for a more extensive technical team.
“The world’s infrastructure is aging, while there is exponential growth in the technology sector, creating a demand for microprocessors, power, energy, and increased need in the crypto industry. Combining these factors, it becomes apparent that the copper market has significant expansion potential.”
Morgan Lekstrom, CEO, Blackwolf Copper and Gold
Metallic Minerals' flagship asset is the La Plata project, a copper-silver-gold-platinum-palladium project located in Colorado. In July 2023, the company announced an updated mineral resource estimate of 1.3 billion lb of copper equivalent and currently continues to drill this project. "So far, we have completed over 2,000 m, and we are focusing on offsets of hole 22-04, which last year intersected 816 m of 0.41% Cu Eq from the surface and ended in 5.39% CuEq over 5.2 m with significant precious metal content including high-grade PGEs," shared Scott Petsel, president of Metallic Minerals.
Another Vancouver-based junior that has managed to secure partnerships, but this time with three big players, is American Pacific Mining, which is focused on high-grade assets across the Western US. The company partnered with Dowa Mining and Metals, investing US$25.5 million to explore the Palmer project in Alaska, a 12-million t VMS deposit containing copper, zinc, gold and silver. In Montana, American Pacific has a joint venture with Rio Tinto, where the Australian producer has the potential to invest US$30 million to secure a 70% stake in the Madison copper-gold project, and, to date, it has invested US$6.8 million. Furthermore, for the Ziggurat project, located at the northern end of Round Mountain Trend (an active mining region in Nevada), American Pacific partnered with Centerra Gold, investing US$1.3 million in 2023. According to Warwick Smith, CEO of American Pacific, partnering with major industry players offers a mutually beneficial arrangement since they provide the financial resources required for exploration while benefiting from discovering new reserves: "To put this into perspective, some larger mining companies like Hecla and Coeur Mining spent US$29 and US$27 million on exploration last year. Hecla has a market capitalization of US$3.5 billion, and Coeur Mining is a billion-dollar company. This highlights how we stand out among junior mining companies due to our substantial exploration and development investments relative to our market capitalization," he explained.
Article header image courtesy of Ivanhoe Electric