Kristie Batten: BHP casts doubt over ‘easy’ copper projects … but we found a few
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One of Australia’s top mining journalists, Kristie Batten writes for Stockhead every week in her regular column placing a watchful eye on the movers and shakers of the small cap resources scene.
BHP’s (ASX:BHP) much-publicised copper report released last week contained plenty of juicy stats about a looming shortage for the red metal.
Among the biggest headline-grabber was BHP’s forecast that global copper demand will grow by around 70% to over 50 million tonnes per annum by 2050.
Adding to the global supply challenge is BHP’s assertion that the project pipeline is less healthy than in previous cycles and those projects will face new and increasing challenges.
“There is a shortage of ‘easy’ projects to replace existing supply and meet this growing copper demand,” the report said.
“We think the price setting marginal tonne will come from either a lower-grade brownfield expansion in a mature jurisdiction, or a higher-grade greenfield in a higher risk and/or emerging jurisdiction.
“None of these sources of metal is likely to come cheaply, easily, or unfortunately –promptly.”
The copper market looks to be awakening once again with prices rising over US$10,000 per tonne last week.
While the following projects aren’t the sort of mega-projects that will put a big dent in the deficit, they are all near-term, brownfields projects with an average grade of over 1% copper that are set to benefit from the rising price environment.
Bill Beament’s Develop Global (ASX:DVP) pushed the button on the $56 million Woodlawn restart project in New South Wales last month.
The company acquired Woodlawn in 2022 from the creditors of Heron Resources, which had spent around $340 million on a new plant and underground mine but ran into multiple issues following the start-up in 2019.
Underground development resumed in August and first ore is set to be mined in early 2025, ahead of first production mid-year.
Woodlawn is forecast to produce 12,000t of copper and 36,000t of zinc per annum over at least 10 years, based on a reserve of 6Mt at 2.6% copper equivalent.
Canaccord Genuity forecasts Woodlawn to generate $419 million in free cashflow over its first three years and has a price target for Develop of $4.50, almost double recent trading levels.
In 2020, New World Resources (ASX:NWC) acquired the rights to the Antler project in Arizona, a historical mine which closed in the 1970s due to low copper prices.
New World released a pre-feasibility study on Antler in July, outlining a 12.2-year underground mine to produce 341,100t of CuEq, or 30,100tpa, at an average diluted head grade of 3% CuEq and at C1 costs of just US12c per pound after co-product credits.
Capital costs are US$298 million, while the post-tax net present value is US$498 million with an internal rate of return of 30.3%.
At a copper price of US$4.66/lb, the NPV increases to US$668 million and C1 costs drop to negative US29c/lb.
New World is aiming to complete a definitive feasibility study by mid-2025 and have all permits in place by the end of next year ahead of first production in 2027.
Orion Minerals (ASX:ORN) has bankable feasibility studies due imminently on two brownfields developments, Okiep and Prieska, in South Africa.
The projects, about 450km apart in the Northern Cape, have produced a combined 2.5Mt of copper historically.
Prieska has a resource of 31Mt at 1.2% copper and 3.6% zinc.
The 2020 BFS identified a 12-year operation targeting 22,000t of copper and 70,000t of zinc per year, generating a post-tax NPV of $552 million, based on a copper price of US$6680/t and a zinc price of US$2337/t.
A 2021 scoping study for a “pilot” phase mine at Okiep returned capital costs of $58 million for 102,000t of copper produced over 12 years at all-in sustaining costs of US$4478/t.
Orion managing director Errol Smart told the Resources Rising Stars Conference on the Gold Coast last month that both could be in production in the next 18 months.
Anglo American-backed Anax Metals (ASX:ANX) holds 80% of the previously producing Whim Creek mine in WA’s Pilbara region, with Develop holding the balance.
Previous studies on a restart of Whim Creek have indicated pre-production capital costs of A$71 million for an eight-year operation producing 55,000tpa of concentrate at AISC of A$3.28/lb, based on a reserve of 4.6Mt at 1.36% copper and 2.3% zinc.
Based on a copper price of US$9223/t, the project returned an NPV of $270 million and an IRR of 55%, with life-of-mine free cashflow forecast at $410 million.
At US$9900/t, the pre-tax NPV increases to $357 million with an IRR of 74%, while free cashflow would be around $520 million.
Whim Creek could become a Pilbara base metals hub. Anax is working with Develop, GreenTech Metals and Artemis Resources with a view to process ore from their respective deposits nearby.
While earlier stage, there are a handful of other potential high-grade brownfields copper projects that could be in production before the end of the decade.
Last year, FireFly Metals (ASX:FFM) acquired the Green Bay copper project in Newfoundland, Canada from the administrators of Rambler Metals for $65 million in cash and shares.
The project, which was operating until early 2023, has an existing resource of 39.2Mt at 1.83% copper and 0.5 grams per tonne gold for 811,000t of CuEq with a resource update dur this month.
Despite already having a 500,000tpa mill, FireFly is eyeing a much larger operation. Argonaut is forecasting construction on an initial 1.8Mtpa plant to start in mid-2026.
Carnaby Resources’ (ASX:CNB) Greater Duchess project in Queensland has a resource of 21.8Mt at 1.3% copper and 0.2g/t gold for 315,000t of CuEq, discovered near the historical Duchess mine which produced around 205,000t at 12.5% copper from 1900-1940.
The company completed a scoping study in June, which identified a $35 million spend to produce 140,000t of CuEq over nine years via a third-party plant.
Carnaby is aiming to complete a PFS early next year and be in production in 2026.
Finally, Eagle Mountain Mining (ASX:EM2) has a scoping study due out on its Oracle Ridge copper project in Arizona, based on the current resource of 28Mt at 1.35% copper, 11.06g/t silver and 0.16g/t gold.
The project produced high-grade copper as recently as the 1990s and there is existing infrastructure in place.
After receiving corporate interest, Eagle Mountain appointed Argonaut PCF to conduct a strategic review.
At Stockhead, we tell it like it is. While Anax Metals, New World Resources and Eagle Mountain Mining are Stockhead advertisers, they did not sponsor this article.