• AIC Mines is one of the few copper producers on the ASX
  • The commodity is expected to see a massive uptick in demand due to the energy transition
  • MD Aaron Colleran says AIC wants to target mutiple 20-40,000tpa copper assets after expansion of Eloise mine near Mt Isa to 20,000t copper and 10,000oz gold a year

Turning a junior miner into a mid-tier and beyond? Aaron Colleran has experience at the coalface with Evolution Mining (ASX:EVN).

The one time mining analyst and investment banker led the business development and investor relations program at the now top three Aussie gold miner from its inception to 2018.

He has since moved gold into copper as the managing director of AIC Mines (ASX:A1M).

Shares in the $170 million capped junior have roughly doubled since it announced the acquisition of the Eloise copper mine in Queensland in August 2021, and remain ahead since the deal despite a 32% drop over the past year.

That coincided with a tough run for copper prices, as short term demand issues rose in China and central banks across the world tightened their belt to cope with inflation.

The red metal is back above US$9000/t, prices regarded as an incentive level to bring new production online.

But there is a real sense the short term headwinds facing it and other industrial commodities cloud a very positive long term future for copper demand and prices, which is set to be supercharged by a blend of supply shortages from traditional production powerhouses Peru and Chile

Every major wants more. BHP (ASX:BHP) signposted as much with its successful $9.6 billion cash takeover of ~150,000tpa player OZ Minerals (ASX:OZL) last year.

That deal will leave a hole for ASX copper investors, with only a handful of standalone producers in the void.

AIC has moved up in the world via its merger last year with neighbour Demetallica. The deal saw AIC add the 180,000t Jericho deposit to the south of its Eloise mine, taking its nameplate capacity from 12,500tpa copper and 6000ozpa gold in concentrate to a more significant 20,000tpa Cu and 10,000ozpa Au with a 10-year mine life once its expansion is complete.

With another $30 million in the bank from investors to study and prep those expansions, Colleran spoke with Stockhead on the copper market and the “growth-oriented” junior’s plan to emerge in the ASX mid-tier.

 

AIC Mines (ASX:A1M) share price today:


 

People are very excited about the copper market and something that’s really noticeable now is that the number of copper stocks that are available to ASX investors is really small compared to other markets around the world. Have you seen a lot of interest coming in from investors on the basis of that dearth of copper producers on the ASX?

“We certainly noticed it when we acquired Eloise, so that’s going back now almost 18 months. We went to do the … re-compliance IPO for AIC mines to recapitalise the company to acquire Eloise in November ‘21.

“And at that stage, you were starting to see a pivot out of gold and into base metals and copper in particular. There’s a lot of funds doing that and at the time, there were actually a lot of executives doing that and I was one of them, having left the gold industry and moved into copper. And what was obvious at the time, the resources investor who is used to investing in the gold market had everything from Newcrest down to Ausgold, from big to small and everything in between.

“That investor knew where they played top end, bottom end, middle and so on. That investor then was pivoting across to base, looks at the copper companies and goes, ‘wow, where on Earth are they? What am I looking at, basically four or five companies after having a selection of 20.’

“And so look, there’s no doubt that at the time we did our recapitalisation for the acquisition of Eloise and more recently with the capital raise, we’re certainly getting interest due to the dearth of other opportunities; I’d definitely say Australian institutions are underinvested in copper at the moment. And they all recognise they’ll be even more underinvested once OZ Minerals disappears.

“They’re looking for the next round of juniors and so we are really building AIC … (into a) new growth-oriented copper miner in Australia, we’re building that company into a vacuum.

“It’s clear that the market wants more copper mining companies, wants growth-oriented copper companies for investment. And we’ve got great support, really strong support from some pretty large institutional investors to do exactly that, to build that company, which is wonderful.”

 

What are some of the institutions that you’ve seen either come on board or take an interest?

“We haven’t had any institutions go substantial recently. But we’ve got a handful, probably about half a dozen who are sitting just below that 5% mark. And amongst them, you know, it’s really a who’s who of Australian resources institutional investors, and behind them a group of high net worth or family offices, predominantly family offices. So at this point none are disclosed via that greater than 5% holding.”

 

Going on to the deal with Demetallica, you’ve got the Jericho mine, a new resource there and you’ve got on the face of it a more than 10-year mine life across the two operations. How long does it take to bed that new Jericho resource into the mine plan and how quickly do you think you go from producing 12,000 tonnes a year to producing 20,000t and being a producer of a bit more substance?

“We’ve set ourselves a really tight timeline, or let’s say an aggressive timeline of being ready to ramp up our production with Jericho ore from the beginning of calendar year ’25. That sees us current year, calendar year ’23, completing all the permitting and approvals required for the expansion of the Eloise Mill and the mining lease approval for Jericho, and then very rapid build and development in calendar year ’24.

“The two reasons I guess it’s such a tight timeline is one, we’re driving ourselves hard and we want to do this quickly. Two, this it’s not a greenfields project that we’re building from scratch. It’s really just an expansion. We’re already out there, we’re already operating.

“The mine has been there for 25 years. We’ve got 150 employees on site, we’ve got all the community and local relations in order. This is a relatively straightforward expansion. Jericho is a similar ore type, similar geology, similar mining conditions. So we’re not starting from scratch.”

 

It’s a drop in the ocean when it comes to what we need in terms of copper going forward. How do you grow and expand in that market. Have you got to sort of develop Eloise get it highly profitable, and then look to make more purchases outside of that Mt Isa area?

“Absolutely. Eloise is our first acquisition, Eloise plus Jericho turns that asset into a cornerstone asset for us in the plus 20,000tpa of copper (range). That’s the appropriate size for that asset. Our growth ambitions then extend beyond Eloise itself. The aim to build AIC Mines into a mid-tier is really about building up four-to-five of this style of asset in that junior company range of 20-40,000 tonnes per annum of copper.”

 

The copper market is obviously in a position where we need to find a lot more copper going forward, but it doesn’t seem like there might be as much copper to be found as we need to actually create things like electric vehicles and transmission infrastructure for renewables. So how do you go about finding and identifying new sources of copper?

“It’s obvious that not just AIC, but (in the whole) copper or base metal markets, miners are going to have to spend a lot more money on exploration and development over the next five to 10 years. We are very focused on high grade underground assets. We’re exploring for them. We’re looking for them as M & A opportunities.

“(The 20,000-40,000tpa assets we’re looking for), that’s a drop in the ocean, it’s 200-400,000 tons of copper per annum assets that the world is looking for. It’s not easy to find those full stop (and) not easy to find those in Australia.

“Some of the much larger projects have inordinately large capital. We’re not focused at that end of the market to very large, very low grade assets with extremely high up-front capital.

“Our focus is on smaller higher grade assets, that sort of 100 million dollars’ worth of capital, not the billion dollars’ worth of capital for some of these larger lower grade assets. In this coming copper boom, they will no doubt get funded.”

AIC Mines owns the Eloise copper mine
Pic: Budd Photography/AIC Mines

 

In terms of that copper price, we’ve seen a little run this year with China reemerging from the shadows of COVID. Are there things out there that make you bullish about copper prices and the copper market going forward?

“It’s easy to be bullish, but that’s a medium to long term view. In my view, what we’re seeing in the market at the moment is a real arm wrestle between the short term, the reality of here and now, versus that medium to longer term outlook. There’s no doubt over the longer term, the world is short copper, and the copper price will have to go higher just on basic supply-demand fundamentals.

“Those fundamentals aren’t in place today. We’re not in a shortage of copper currently, or possibly over the next six months. So that’s the arm wrestle we’re seeing at the moment. The long term view that there will be a significant supply shortage and the copper prices is almost undoubtedly going higher to US$5 a pound, if not US$6 a pound.

“But in the short term, supply is meeting demand at around the US$4/lb mark we’re seeing now and we’re fluctuating around that rather than getting excited about what the price will be next year or even more excited in the year after.”

 

Do you see companies or investors pivoting back towards projects that might not have the scale of the South American mines, but are based in Australia, in a safer jurisdiction, given the issues that we’re seeing in Peru at the moment?

“Almost without doubt, but to have a portfolio of size, to build a base metal or a copper company of size, it is difficult to limit yourself to the first world. Ideally, what you’d look for was a company with a base of assets in a first world jurisdiction.

“When we really crystal ball gaze or look to the longer term there may be a point in the future where AIC does step offshore. But we want to build a solid base of assets in Australia well before that move.”

 

You had OZ and Sandfire on the register of the company after you took over Demetallica, is that right?

“Both Oz and Sandfire were joint venture partners on that Eloise regional exploration ground. Demetallica bought them out of that a year or two years ago and bought them out for shares in Demetallica. So when we took ownership over Demetallica that brought both OZ Minerals and Sandfire on as shareholders. Sandfire have recently sold their stake and OZ sit there still on our register.”

 

So that will become BHP. What’s your perspective on potentially having BHP on the register?

“I can’t imagine they’ll be a long term shareholder in a company as small as ours.”

 

What is the production forecast at the moment and when are you expecting to have those expansions in place to 20,000t?

“Eloise, as it currently stands should be able to do 12,500 tons of copper and 6000 ounces of gold in concentrate per annum. We should be able to do that divided by four in any quarter, we should be able to do that divided by 12 in any month.

“However, the six months that we’ve just completed has been a difficult six months, as we’ve had some trucking reliability issues. And as I’ve said to a few people, that’s not rhyming slang. That’s actually the problem with our trucks and we’ve been down in the deepest part of our ore body and so that trucking issue was exacerbated.

“So the last six months, we’ve been more at a 10,000tpa scale. That will lift in the coming six months as we open up a new area of the orebody in the upper levels facing north, new trucks on site, and a few other productivity improvements we’ve been making.

“We’ll start the lift to just over 20,000t during calendar year 2025 when we start to bring on Jericho, or more specifically the Matilda and Jumbuck Lodes at Jericho.”

 

The broader package, do you see it as being ripe for new discoveries that potentially have a step up in scale or you’d be able to add on with the ground that wasn’t consolidated before between Eloise and Jericho?

“We’ve gone from a 5km2 leasehold into a 2000km2 leaseholding. This is an extremely important part of the Demetallica deal which was really not just Jericho itself, but access to that full 2000km2. To the west of us the Sandy Creek deposit, that is potentially an open cut with 2Mt of ore out there and an area that needs more exploration, it’s open down plunge.

“Artemis, which is only 300m west of Sandy Creek, a very intense area of metal accumulation, open along strike and down dip, so that’s about 40km west. Immediately north Iris, Electra, Bigfoot line of strike, 4km worth of strike there where OZ Minerals did some very broad spaced deep drilling and mapped mineralisation.

“A lot of follow up work for us to do on there. And then you’re right, to the south there’s anomaly between Jericho and Eloise and to the south of Jericho there’s more work to do. We had good exploration prospects within the Eloise mining licence of only 5km2. And now taking that over 2000 we essentially own the whole field.

“Comfortable we’ll be processing at Eloise well beyond 10 years as exploration brings on new deposits and deposits of a scale relevant to a hub and spoke style of operation in the past but they weren’t relevant to the previous explorers OZ and Sandfire who were looking for much larger, let’s say a Prominent Hill, Carrapateena style deposits.

“As soon as it wasn’t a project of that scale, they stopped drilling and moved on to the next anomaly, but what they’ve left for us is a fantastic database to immediately follow up projects that will become a relevant size for a hub and spoke operating thesis.”

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