Caravel gains investor support on top notch numbers for WA copper project
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Special Report: Caravel Minerals (ASX:CVV) looks as if it has a big, long-life, money-maker on its hands with the release of outstanding economics for its namesake copper project — which sent shares up nearly 10 per cent.
The Caravel project is the largest undeveloped copper resource in Western Australia.
And a scoping study has now shown that it will run for 23 years producing 16 million tonnes per annum (Mtpa) in the first five years and ramping up to 30Mtpa from year six.
A scoping study is the first proper look at whether a resource can be mined economically.
The scoping study showed Caravel will generate free cashflow of $3.1 billion on net revenues of $10.6 billion over nearly two and a half decades.
The Caravel operation will have a pre-tax net present value (NPV) of $1.05 billion and a post-tax internal rate of return (IRR) of 20 per cent.
NPV and IRR are metrics used to assess the profitability of a project. The higher the NPV and IRR, the more profitable a project will be.
“The results of the 2019 scoping study confirm the very real potential to establish a new copper mining and processing operation to produce and export copper concentrate to global markets over 23 years and potentially longer,” newly appointed managing director Steve Abbott said.
Caravel’s estimated C1 cash costs of $US1.45 ($2.09) per pound places the project in the second quartile of copper producers for the first five years, positioning it as a low to mid‐cost operator over its very long life.
“This scoping study highlights the potential for developing a robust standalone mining and processing operation capable of generating strong margins and excellent financial returns,” Abbott said.
The initial capital spend required to build Caravel is $481m — a sum that will be repaid within the first four years of production.
Importantly, the scoping study used a conservative long‐term average copper price of $US6,612 per tonne, or about $US3 per pound.
However, with copper grades decliningaround the world and new major discoveries proving elusive, experts forecast the price could be much higher — which would enhance the economics of the Caravel project even further.
On top of that, demand is set to increase quite substantially given the rapid rate at which the world is pushing for more electric vehicles and associated infrastructure.
Plus, there is a building boom going on right now on the east coast of Australia, and China is still urbanising.
Caravel is a porphyry deposit, which means it is hosted in a type of granite rock, the same as most of the major copper deposits around the world, although the rocks at Caravel are much older than most other porphyry deposits and it was never expected to find a deposit like this in this region.
This makes it the first discovery of porphyry copper in the region, with the only comparable deposit being the well-known Boddington gold mine that has been producing for a decade now and is one of Australia’s largest producing gold mines.
Boddington produces gold as well as a copper concentrate, though the copper grades are lower than Caravel and gold is the main source of revenue.
Porphyry deposits are usually large and low-grade but can be mined at low cost due to their scale. Globally, over 60 per cent of copper and all of the world’s molybdenum comes from porphyry deposits.
And there is still a lot more potential for significant resource increases, according to Caravel.
The project has seen only limited drilling and numerous sections of the resource remain open along strike, at depth and downhole.
In Abbot’s new role as managing director, he will steer the Caravel project toward development.
He joined Caravel Minerals in September 2018 as general manager feasibility, responsible for leading the delivery of the Caravel copper project scoping study.
Prior to Caravel, Abbott worked as general manager iron ore and industrial minerals for BC Iron (now BCI Minerals ASX:BCI) and general manager business development for Gindalbie Metals (ASX:GBG).
Earlier in his career, Abbott spent eight years at Western Mining Corporation — which was taken over in 2005 by BHP (ASX:BHP) — where he held various mechanical engineer and metallurgist roles culminating in a period as smelter superintendent at the well-known Olympic Dam copper and uranium mine in South Australia.
A highly regarded mining executive with more than 24 years’ experience in senior international and resource sector roles, Abbott will now be responsible for leading Caravel’s growth strategy and business operations.
Given the strong results of the scoping study, Caravel, under Abbott’s leadership, will now progress more advanced feasibility studies.