Copper’s now a US critical material – here’s how that could impact ASX stocks in the US and South America

Copper finally joined the ranks as a critical material in the US last week alongside a list of ~20 others, reflecting the reality that copper demand projections will require an increase in domestic production.

The move was made by the US Department of Energy (DOE) following an assessment on key materials with high risk of supply disruption that are integral to clean energy technologies.

The Critical Material list differs from the Critical Mineral list in that the latter is based on “any mineral, element, substance, or material designated as critical by the Secretary of the Interior, acting through the Director of the U.S. Geological Survey”.

According to the Energy Act of 2020, a Critical Material is:

Any non-fuel mineral, element, substance, or material that the Secretary of Energy determines: (i) has a high risk of supply chain disruption; and (ii) serves an essential function in one or more energy technologies, including technologies that produce, transmit, store, and conserve energy; or
A critical mineral, as defined by the Secretary of the Interior.

With market indicators (supply and demand) pointing to a potential 6 million tonne shortfall in the next five to 10 years, the move to include copper to the list feels like a no-brainer.

In fact, according to the World Bank, the copper industry needs to produce as much of the red metal as humanity has produced in the last 5,000 years to keep up with demand over the next 20 or so years.

Leg-up for US-based ASX copper

All of this is seen as a boon for ASX listed copper companies, especially those operating in the US.

Eagle Mountain Mining’s (ASX:EM2) Oracle Ridge copper-gold project in Arizona is getting ready to locally feed one of the largest markets in the world.

The company is currently in the process of upgrading its MRE, which sits at 16.5Mt at 1.45% copper, 15.1g/t silver and 0.19g/t gold for 240,000t contained copper, 8Moz contained silver and 102Koz contained gold.

In an interview with Stockhead, EM2 CEO Tim Mason said the addition of copper to the US Critical Materials list could potentially lead to copper projects being brought online faster, helping to fill what looks to be a very bare cupboard for new meaningful copper supply.

“The US has set a goal for 100% clean electricity by 2035 and copper is massively required to support clean energy through electricity, just because of its conductivity,” he explains.

“A lot of copper is going to be needed and the US is a net importer of refined copper.

“Thankfully for us, the country is starting to realise the importance of shoring up the mineral for national security and to support net zero ambitions.

“Critical materials get funding assistance for their capital requirements, for doing pilot plants and research, and in some cases, for their exploration phases as well, so we’re in a good place to benefit.”

Who else is in the US?

NEW WORLD RESOURCES (ASX:NWC)

NWC’s Antler copper mine, also in Arizona, boasts 11.4Mt at a copper equivalent grade of 4.1% Cu, one of the highest in the global development pipeline.

A recently updated scoping study suggests the project will run at an operating rate of 1.3Mtpa over 13 years, a 30% increase on the 10-year mine life previously announced, with a 41% increase in total copper production to 381,400t on a copper-equivalent basis.

Annually the mine would deliver 32,700t of CuEq production over its first decade, 7% higher than previously planned, including 16,400t of copper metal a year.

That would generate US$3b in revenue ($4.3b), 50% or US$1b above prior forecasts, 58% more free cash flow at US$1.5b ($2.15b), with a 59% rise in pre-tax NPV to US$835m ($1.25b), IRR of 40.2% and only a 25% rise in capex to US$252m.

The stock is now heading into its PFS, which is targeted for completion in Q4.

DIABLO RESOURCES (ASX:DBO)

This early-stage copper explorer owns the Devil’s Canyon copper-gold project in Nevada.

The project consists of 90 mineral claims covering 6.5km2 and is within close proximity to Kinross Gold Corporation’s Bald Mountain gold mine and 40km north of Barrick Gold Corporation’s Ruby Hill.

DBO is currently sourcing a drilling contractor to complete a planned ~1000m drill program at several target areas. All permitting is in place with the BLM with earthmovers and other logistical contractors having been secured.

MOAB MINERALS (ASX:MOM)

Moab’s highline copper-cobalt project, also in Nevada, has historically produced 447 tonnes of copper ore at about 35% Cu, the highest in the district.

At the nearby Copperside Mine, 300m to the east and outside the claim block, 621 tonnes of copper ore were mined from a similar size working at an average grade of 24%.

The company’s priority is to expand the land holding prior to embarking on further exploration and as a result no work was carried out during the June quarter.

Copper stocks in South America

For copper stocks based further afield in South America, companies could benefit from shorter supply routes and favourable trade agreements.

Hot Chili (ASX:HCH) managing director and CEO Christian Easterday told Stockhead these strategic supply routes between the two continents will become increasingly important.

“The world will now start to see an increasing scramble for critical mineral security as we approach the end of this decade and supply constraints begin to impact input costs for industry.

“Copper is the third commodity set to see a dramatic price re-rate with a similar predicted demand step-change colliding with a commodity space inability to produce timely and meaningful supply-response.

“And the largest leveraged copper companies are the ones with the largest exposure.”

HCH is developing its near-term monster copper project, Costa Fuego, which holds an indicated resource of 2.8Mt Cu, 2.6Moz Au and 67kt of Mo (in 725Mt) and inferred resource of 0.6 Mt Cu, 1.2 Moz Au and 13kt Mo (in 202Mt).

From Easterday’s point of view, the addition of copper to the US Critical Minerals list, put simply, is confirmation of the worst kept secret in the energy transition.

“Copper is the number one critical metal of the next decade.

“None of the world’s decarbonisation goals, which have been set, can occur without a step-change in new supply,” he explained.

“It is kind of like the moment in the game Cluedo when the Doctor is chosen – Correct, it was always going to be Doctor Copper that could facilitate such ambitious globally synchronised net zero targets.”

Meanwhile, Belararox (ASX:BRX) is advancing its Toro–Malambo–Tambo (TMT) project in Argentina following the identification of 11 prospective targets during a satellite Aster and Sentinel 2 study, which confirmed hydrothermal alteration.

The targets, which have been ranked on prospectivity, are likely to represent surface expressions of high-sulphidation epithermal or porphyry-style mineral systems.

BRX will be following these targets up with geological mapping and sampling once Environmental Permits have been granted.

Copper stocks share prices today:

At Stockhead we tell it like it is. While Eagle Mountain Mining, New World Corporation, Diablo Resources, Moab Minerals, Hot Chili and Belararox are Stockhead clients, they did not sponsor this article