Comet Resources eyes $27m cap raise to restart Mt Margaret copper project

Comet Resources is gearing up to raise $27m to acquire the Mt Margaret Copper Project from Glencore – with plans to restart production at the historic mine.

The company is focused on a low capex path back into production within 24 months, with the project perfectly placed just 7km from Ernest Henry Copper-Gold Mine with all its infrastructure in Queensland’s established Mount Isa/Cloncurry region mining region.

The cap raising is expected to fund pre-development activities, to review historical data for drilling targets and to kick off extension drilling.

“The mine has successfully produced for two years from 2012 to 2014 in a copper environment that was a lower price that it is right now – and it was profitable back then so it’ll be profitable now, “ Comet Resources (ASX:CRL) MD Matthew O’Kane said.

“It’s got an existing resource there of 13Mt at 0.78% copper and 0.24g/t gold, but historically, there was a much larger resource done prior to the project going into production, so all we basically have to do is drill a few holes and then re-estimate the resource less mining depletion.”

Toll treating the key to low capex

“It’s next door to Ernest Henry, where the ore was successfully processed when it was in production previously, and that plant has significant open capacity, so there is the option of treating our material through that plant – and Ernest Henry per their own external disclosures are looking for additional material,” O’Kane said.

“That presents an opportunity for an extremely low capital return to production because essentially all we need to do is drill, then do a revised resource that incorporates the historical resource less mining depletion, plus the current resources and anything further we define from drilling – and then do a PFS and a DFS on those resources.

“Our production plan is to contract mine and to toll treat, either and preferably at Ernest Henry because it’s closest, but if not, at Mount Isa, which also has open capacity.

“So, you avoid the capital expense, and also the time to build and construct your own plant.”

Plus, back when the mine was put on care and maintenance, two additional open-pits had been pre-stripped covering the majority of the currently defined resource – which is about a $10m saving in capital pre-strip costs on restart.

Comet — Pic: Location of the Mt Margaret Copper Project.

Infrastructure in place to support a restart

Another bonus of the historical project – it was fully developed into a mining project previously and is on permitted Mining Licences (MLs) which saves the company a long and tedious permitting process.

“Just being in the historic mining region of Mount Isa in the Mount Isa/Cloncurry area is a huge bonus,” O’Kane said.

“All the infrastructure is already in place to go back into production, there’s competent staff and mining services already there – compare that to companies that might have a fantastic asset, but it’s in the middle of nowhere.”

O’Kane also flagged that the project represents both potential near-term copper production and regional exploration upside, with nine mining, infrastructure and regional exploration tenements hosting known iron oxide copper gold (IOCG) style deposits.

“The project also appealed to us because it’s very high confidence,” he said.

“And then finally, there is a very clear and credible low capex path back into production within 24 months via just essentially a restart of mining operations and toll treating of ore.”

Another copper project and graphite exposure

Another feather in the cap is the historically producing Barraba project in NSW, which will also nab a portion of the capital raising for drilling.

“Barraba is a VMS deposit which offers interesting exploration possibilities, and we plan to commence a drilling campaign on that project as well,” O’Kane said.

Plus, the company also holds 25% of spun-out International Graphite (ASX:IG6) which recently was confirmed to be amenable for the production of battery anode grade material – and not many graphite deposits can do that.

International Graphite is a downstream processor which takes the graphite and turns it into the material that goes into the lithium-ion battery anodes.

A clear peer of IG6 is Renascor (ASX:RNU) which is maybe 18 to 24 months ahead of International Graphite, and valued in excess of $500 million, which Comet says represents the possibility for large upside in the value of its shareholding in that as well.

This article was developed in collaboration with Comet Resources, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.