Caravel Minerals has announced that its set to bring a massive amount of copper to market from the biggest undeveloped resource in the country. Pic via Getty Images.
Mining
A brand new copper mine in Western Australia could bring 62,000t of the battery metal into production from the end of 2026 as demand for the commodity soars from the energy transition.
Caravel Minerals (ASX:CVV) has delivered a landmark pre-feasibility study on its 2.84Mt (based on contained copper Mineral Resource) Caravel project located near Wongan Hills in the WA Wheatbelt.
It promises to be one of the most advanced bulk, low grade copper mines in the world, leveraging technology and its location in the world’s best mining jurisdiction to deliver a key source for the metal dubbed “the new oil” over a long initial life of 28 years.
The vitals for the future mining operation look very impressive, especially in a forecast supply gap that could hit 4-10Mt by the 2030s as copper demand increasing from ~25Mt to more than 30Mt annually by the end of the decade.
Confirmed today as one of Australia’s largest undeveloped copper project, Caravel will boast output of ~62,000t of copper in concentrate, a scale only sparingly seen in mines outside of South America at a C1 operating cost of just US$1.72/lb and AISC of US$2.55/lb.
At an average copper price of US$4/lb that would generate over $17.5 billion in revenue across its near three-decade life of mine and net cash flow of $4.62b, with under a seven year capital payback, $1.1b pre-tax NPV and internal rate of return of 14.7%.
A new maiden Ore Reserve of 583Mt at 0.24% copper for 1.42Mt of contained copper at a 0.1% cut off has significantly de-risked the project from a mining perspective and confirmed its status as Australia’s largest undeveloped copper mine.
81.6% of the project’s 28-year mine life is in the Ore Reserve, based on 7740m of diamond drilling and 20,233m of RC drilling at the main Bindi deposit since 2019, with just 2% of material mined over the first 20 years of operations inferred.
“The Pre-Feasibility Study and Maiden Ore Reserve have confirmed the Caravel Project as the largest undeveloped copper project in Australia and one of the few large undeveloped copper projects in the world that will be ready for development in the coming years as the world demands more copper for electrification and renewable energy,” Caravel managing director Steve Abbott said.
“Caravel can be a low-cost, long-life copper project based on initial Resources of 2.84 million tonnes of contained copper supporting a 28-year mine life. This is based only on the Bindi and Dasher deposits and there is excellent potential for our resource base to grow with further exploration and drilling.”
While the PFS numbers look impressive on first glance, there is plenty of improvement already in train ahead of the project’s planned definitive feasibility study.
Caravel’s PFS shows the project carries an initial capex including $1.2b for its dual train plant and infrastructure, $309m for initial mining plant and equipment which is expected to be financed by arrangement with vendors and $189m for initial mining pre-strip.
However, a number of very significant improvements are being assessed that are expected to substantially lower the capital and operating costs for the project.
The PFS scenario envisions a 27.8Mtpa processing operation made up of two 13.9Mtpa capacity trains.
But optimisation studies by consultants Ausenco are already in progress and slated to be released next month on a single train 27Mtpa design, which is expected to show major reduction in both capex and opex.
Caravel is also looking into the use of High Pressure Grinding (HPGR) mills that may offer further operating cost improvements against its current plan for Semi-Autogenous Grinding (SAG) mills.
That could deliver substantial power savings, with other improvement initiatives also being studied including:
The dual train design was originally selected to stage project financing and other requirements for infrastructure and services, but subsequent studies have shown the project may be developed to its full capacity from the start, improving its financial performance from construction efficiencies and maximising early cashflow.
That means Caravel could hit the full ~62,000t run rate early with conventional crushing, grinding and flotation to recover a 25% copper concentrate with impressive metal recoveries of ~92%.
To give an idea of the scale of that production, it equates to an incredible 130Mlb per annum.
Caravel will be one of the first copper mines globally to use a fully autonomous and electrified mining fleet to improve safety outcomes and reduce its environmental impact.
Leveraging WA’s advancements in the roll out of autonomous haulage at its giant iron ore mines in the Pilbara, Caravel says the technological discoveries made by the state’s major mining houses are now widely available.
Caravel expects to save 16% in its C1 cash costs compared to a conventional manned diesel fleet with the addition of automation, communication and electrification tech.
That will include a 1000hr increase in tyre life, 15% drop in maintenance costs and reduced damage provisions.
Improved efficiency and increased speed from using autonomous control and trolley assist are expected to also reduce the size of the peak haulage fleet by six 220-240t trucks to 36.
The Bindi and Dasher pit shapes allows for good communications coverage with an overall shallow slope angle of the high walls enabling a high quality communication link to high bandwidth, low latency fibre-optic cables available in Wongan Hills.
Meanwhile, the move is expected to generate serious ESG benefits, with the ACE system and electric mining fleet to reduce mine CO2 emissions by 25% compared to using a conventional diesel fleet immediately.
That will only improve when the WA Government increases the capacity of renewable generation in the South West Interconnected System, its main electricity grid, where it plans to shut down coal-fired power stations in Collie by the end of the decade.
“We have given a lot of attention to the mine planning, as there have been major advances in mining technologies over recent years,” Abbott said.
“Caravel intends to make extensive use of automation and electrification technologies, including an autonomous haulage fleet using electric power from a ‘trolley assist’ system.
“These technologies are now well established, especially in Western Australia, and will maximise safety and efficiency while minimising our environmental impact and reducing our costs.
With Caravel expected to create 350-450 permanent jobs in WA and pay around $1 billion in royalties, Abbott says this will be an important factor in providing an attractive and flexible work environment.
“Our project will have long-term positive impacts on the regional economy, generating investment and employment opportunities for the region and supporting local businesses,” he said.
“The Project is uniquely positioned to capture the benefits of established infrastructure in one of the best jurisdictions in the world to develop a mining project.”
Caravel’s project timeline is perfectly crafted to take advantage of the aforementioned perfect storm coming for copper miners.
Mined supply is beginning to look troubled, with lower grades and continued labour issues in Chile and Peru, the world’s largest copper producers, placing long-term supply under threat.
As supply from existing sources retreats new mines will be needed to not only replace them, but also respond to demand for the red metal that could increase by 25% over the next ten years as Asian urbanisation, electric vehicles, renewable energy and electrification infrastructure explodes.
With optimisation studies on the single train design due next month and the environmental approval process for Caravel expected to begin in the second half of 2022, a DFS is planned to begin immediately with completion due in the first quarter of 2024.
Project financing will be wrapped up by the end of that year ahead of an 18 month construction period, with copper to be coming out of the plant from the second half of 2026 on.
While the copper market is expected to be in surplus in 2023 and 2024, Caravel’s timeline will dovetail with an expected inflection point for copper prices, which would need to rise to incentivise new mines to open to fill a growing shortfall.
Macquarie expects prices to trend upwards from US$4.20/lb from 2026, while Goldman Sachs metals expert Nicholas Snowdon said in May a long term copper price of US$15,000/t (equivalent to US$6.82/lb) “could be conservative”.
Copper has never been above ~US$10,700/t – a level it briefly hit twice last year – with Goldman’s tip an indication of the major shake-up coming in the global consumption of metals for energy as decarbonisation becomes the dominant investment theme globally.
This article was developed in collaboration with Caravel Minerals, 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.
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