OZ Minerals’ option deal – potentially worth up to $405 million – to acquire Havilah’s (ASX:HAV) Kalkaroo copper-gold deposit in far northeast South Australia has put a spotlight on the state’s other copper juniors.

The option may well not be exercised. But for the time being at least, it has demonstrated that established copper producers like OZ with its $7.5 billion market cap are valuing undeveloped copper resources with some scale to them at much higher levels than the market has been.

To Garimpeiro’s way of thinking, it means that it could be worthwhile running an eye over SA’s other junior copper stocks, using the valuation metrics implied by the OZ option deal on Kalkaroo as a guide.

Kalkaroo is a project at the pre-feasibility study stage. Based on a 2018 resource assessment, it comes with 1.1Mt copper and 3.07M ozs of gold, plus cobalt.

OZ’s 18-month option deal involves the payment of $205m on exercise of the option, an additional $65m on the resource being increased by 30%, and up to an additional $135m for copper production should copper be selling for more than $US10,000t.

Little wonder then that Havilah shares raced from 16.5c to 30.5c on Tuesday when the option deal was announced, taking its market cap from $51m to $94m.

While up by 84%, the new and higher market cap obviously remains at discount to the headline value of the option deal because OZ could walk away at any time.

Still, the headline value of the option deal does suggest that copper resources held by the juniors are being undervalued by the stock market compared with what the big copper producers are prepared to pay for the projects.

Garimpeiro has come up with three other SA copper juniors that could well benefit from a market re-rate following the OZ deal on Kalkaroo (remembering that Havilah is keeping its other copper assets, and its iron ore project interests).

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REX MINERALS (ASX:RXM): Trading at 23c for a market cap of $136m million. It owns the much more advanced Hillside copper-gold project on SA’s Yorke Peninsula project.

In fact, it is shovel ready, with a final investment decision targeted for the fourth quarter of 2022, subject to financing be completed.

The copper resource is also bigger at 1.96Mt (reserves of 1Mt) although its gold resource is smaller at 1.45M oz. Its forecast cash costs come in well under what Havilah has published.

On Garimpeiro’s maths, all that makes Hillside worth more than double the headline value of the OZ option deal on Kalkaroo.

That brings Rex’s current $136m million market cap into sharp focus in an increasingly hot market for advanced copper assets, as is reflected in OZ’s deal with Havilah.

And that is without giving Rex any value for its 2.3M oz and growing Hog Ranch gold project in Nevada. Again using deals done for similar projects as a guide, Hog Ranch alone could be worth as much as $100m.

HILLGROVE (ASX:HGO): Trading at 7.2c for a market cap of $85 million. Hillgrove owns Australia’s “next’’ copper mine – Kanmantoo, about 25km from Mount Baker in the Adelaide Hills.

Garimpeiro qualified the “next’’ there as Hillgrove is actually working at restarting the mine which produced copper/gold up until 2020 when mining from open-cuts at the operation stopped.

Kanmantoo is coming back as an underground operation, initially based on a 69,000t copper mineral resource estimate. Because of the existing infrastructure, the cost of the restart is as low as can be had at about $30m.

It will be very much the start of the story too as there are multiple opportunities to increase the resource base to provide for a longer and bigger life. A final investment decision on the restart is expected mid-year.

All-in sustaining costs for the Stage 1 restart have been put at $A6,991/t. That compares with the current price of $A13,240/t. Talk about robust economics.

CODA (ASX:COD): Trading at 42c for a market cap of $52 million. It is one that OZ and other copper companies have an eye on as it teases out the big time potential of its Elizabeth Creek copper-cobalt-silver project.

Located 100km south of BHP’s Olympic Dam monster, and 40km west of OZ’s Prominent Hill copper/gold mine, the project already has a 1.1Mt copper equivalent resource under its belt across three deposits in the sediment-hosted style.

It is also zeroing in the big time potential of its Emmie IOCG target (like Olympic Dam and Prominent Hill) at a depth of 400m below the Emmie Bluff resource which itself has room to grow. Likely undervalued on the sediment hosted copper alone, it will be off to the races if the IOCG shapes up.

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