The ASX small cap copper explorers next in line to reach mid-tier status

Copper M&A is rampant with large caps like BHP looking to secure future supply
Middle tier copper companies have disappeared before our eyes
Here are seven copper explorers who could step up and make a new middle tier in Australia

Copper has become the hot ticket in mining M&A in recent times on the back of strong demand expectations with the global shift towards electrification and decarbonisation.

The world’s biggest miner, BHP (ASX:BHP), confirmed the long-term importance of the red metal after winning agreement from the board of Oz Minerals (ASX:OZL) – the largest pure play copper miner on the ASX for a $9.6bn buyout.

The deal represented a 13% lift to its original offer that was considered ‘too low’ and sparked countless guesses as to who might be next.

Over the course of 2022 we saw a trend emerging of fewer but higher value transactions, driven by factors such as the price environment, shifts in target focus, and longer-term expectations of demand evolution.

Bye to large

By and large, S&P Global says around 45% of the companies and projects targeted for takeover offers were found in two jurisdictions – Canada and Australia – with the two countries accounting for 69% of the total deal value.

At the big end of town, there’s been deals galore with Rio Tinto (ASX:RIO) taking full control of Canadian miner Turquoise Hill for US$3.1bn which saw its stake in the Mongolia-based Oyu Tolgoi copper project increase to 66%, US-based Metals Acquisition Corp’s proposed acquisition of Glencore’s CSA mine in NSW’s Cobar region for US$1.1bn, and South 32’s (ASX:S32) 45% acquisition in the Sierra Gorda copper mine in Chile.

This year, news is out that Glencore is making moves to acquire Canadian mining giant Teck Resources for US$23bn, while mid-tier companies are disappearing before our eyes.

Or are they?

Here’s a list of seven copper explorers ready to step up and make a new middle tier in Australia.

The ASX small cap explorers next in line to hit mid-tier status

HILLGROVE RESOURCES (ASX:HGO)

Hillgrove is confident it can materially expand the scale of the Kanmantoo copper and gold mine in South Australia ahead of the restart of the country’s next operating copper mine in early 2024.

HGO has announced a new exploration target of between 10-20Mt of copper rich ore with a target grade of 0.9-1.3% copper and 0.1-0.3g/t gold, based on six of the nine higher grade copper-gold zones already mined in the project’s open pit or intersected in exploration drilling.

Early works started last week at Kanmantoo, where the recommencement of copper sales next year will see HGO return to the exclusive ranks of the ASX’s listed copper producers.

The mine is expected to deliver $205m of post-tax free cash flow at a remarkable internal rate of return of 231%, producing 43,500t of copper and 11,500oz of gold from 4.5Mt of ore over a 45 month mine plan.

That comes with a lead time of only seven months from the start of construction to copper sales, with a nine-month payback period on its fully-funded $25m capital bill thereafter.

CARAVEL MINERALS (ASX:CVV)

Canaccord Genuity believe Caravel’s namesake porphyry project of the same name in Western Australia is the largest, undeveloped copper project in the country with a resource of 1,180Mt grading 0.24% copper for 2.8Mt of contained copper.

A bundle of improvements to the PFS were delivered earlier this month, taking the net present value of Australia’s next copper mine to over $2 billion.

In concert with study experts Lycopodium and Orway Mineral Consultants, Caravel has set the stage perfectly for its H1 2024 definitive feasibility study with a string of upgrades that will boost scale and revenue, reduce payback time and cut all in sustaining costs.

For context, the project will be comparable in annual copper output to mines like BHP takeover target OZ Minerals’ Prominent Hill and Carrapateena, and Sandfire Resources’ recently shut DeGrussa, with the update increasing steady state copper output from 60,000tpa to 65,000tpa over a 26-year project life.

CUFE (ASX:CUF)

CuFe is enjoying a very welcome 16% increase in contained copper resources at the Orlando deposit within its Tennant Creek project in the Northern Territory.

The Orlando resource increased to 2.88 million tonnes grading 1.3% copper and 1.4 grams per tonne (g/t) gold, or contained resources of 36,500t of copper and 130,400oz of gold, on the back of 2022 resource drilling while the overall Tennant Creek resource now stands at 7.29Mt at 1.7% copper and 0.6g/t gold.

Potentially of greater interest to CUF is that the majority of the Orlando resource (29,200t of copper and 99,000oz of gold) is contained within the higher confidence Indicated category, which also provides improved assurance about its resource model.

ALMA METALS (ASX:ALM)

Further assays from Alma Metals’ core drilling at the Briggs copper project in Queensland have extended the copper-molybdenum sulphide mineralisation for the third time in as many months.

The drilling is testing exploration targets (together an estimated 370Mt – 695Mt at 0.2% to 0.35% copper) at the Northern and Central Porphyry areas, and in late Feb, the company reported a second 536.5m deep hole into Northern Porphyry had intersected “multiple mineralised porphyritic intrusions”.

It is ~150m away from hole one, which pulled up almost continuous copper mineralisation from surface (441.5m at 0.21% copper from 8m down-hole depth to end-of-hole) with the hole ending in mineralisation grading 0.34% copper over the bottom 3.5m.

Alma is making good on its deal with Canterbury Resources to earn up to 70% of the project by spending up to $15.25m on exploration over nine years, and has its sights set on an easy-mining, shallow porphyry deposit.

Porphyry mines are huge, responsible for ~60 per cent of the world’s copper and their large volumes make up for the low grades, typically between 0.2% to 0.7% copper equivalent.

KINCORA COPPER (ASX:KCC)

Kincorra is one of only a few explorers hard at work in one of NSW’s most mineral rich areas – the Macquarie Arc – which is considered a world-class porphyry district, likened to Canada’s golden triangle.

Drilling at the Trundle project in March interested significant zones of potential ore-grade mineralisation at shallow depths in the first holes across three targets, part of the company’s bid to assess whether it is sitting on the next major copper-gold porphyry discovery… or series of discoveries.

The first assays from Trundle have been returned just weeks after news that Fortescue Metals Group and junior explorer Rimfire Pacific Mining have both started drilling next door to Kincora’s project and are testing its margins.

Exploration activity across the mineral-rich region is stepping up fast, with multiple players announcing the progress of drilling or notable investment in planned drilling.

Meanwhile Alkane Resources has demonstrated the massive scale of what the porphyry systems in the district can hold, with a resource upgrade to almost 15Moz gold equivalent at its wider Boda-Kaiser deposit.

Copper stocks share prices today:

PEEL MINING (ASX:PEX)

Peel Mining has a dominant landholding in the Cobar Basin of NSW with an excellent track record of delivering shareholder value through exploration with discoveries across three deposits – Mallee Bull, Wirlong, and Southern Nights.

Strong drilling results from drilling carried our over the last 18 months has allowed Peel to upgrade the copper-dominant resource at its ‘South Cobar’ project to 10.6Mt at 1.85% copper.

PEX says the work on Mallee Bull and Wirlong has also allowed for about 70% of this resource – including 152,000t or 77% of the contained copper – to be classified under the higher confidence Indicated category, which means the company has sufficient information on geology and grade continuity to support mine planning.

Having a strong copper resource is also a huge ace in the company’s pocket given that demand remains strong.

CASTILLO COPPER (ASX:CCZ)

Signs suggest Castillo could be onto a Big One within its NWQ project in Queensland’s Mt Isa copper belt, which has an Inferred JORC mineral resource estimate at 2.1Mt at 1.1% copper for 21,886t of copper metal.

Entech Mining has been engaged to undertake a pit optimisation study and mine design study for the Big One deposit, which should articulate a clear pathway to begin copper mining operations.

Alongside this work, Castillo Copper will knuckle down on capitalising Big One’s exploration potential via drill testing known targets north of the line of lode.

As the macro-outlook for the future facing commodity begins to heat up, and with CCZ’s footprint a proverbial stone’s throw from major heavy weights including Rio Tinto, Anglo America, Teck and Glencore, the company believes there is a compelling case to ram up exploration activities.

Meanwhile, at the company’s Cangai copper mine in NSW, the geology team has been updating and enhancing the confidence in the 2017 JORC mineral resource estimate, which currently sits at 107,589 tonnes of copper metal.

Once the work is complete, the board will review the findings and determine the optimal way to develop Cangai Copper Mine’s full potential.

Copper stocks share prices today:

At Stockhead, we tell it like it is. While CuFe, Alma Metals, Peel Mining, and Caravel Minerals are Stockhead advertisers, they did not sponsor this article.