Who is a winner from the Federal Budget’s forecasts for further rapid increases in power and gas prices, and further significant investment in the increasingly urgent energy transition? There are a few, but the most critical metal to achieve the required transition is copper. But just where is all the red metal needed to wire this going to come from?  

Wood Mackenzie forecasts that for the world to meet zero-carbon targets, the mining industry would have to deliver new projects at a frequency and consistent level of financing never previously accomplished.

Nearly 10 million tonnes of additional copper supply is going to be needed over the next decade, which will require more than $US23 billion ($35.4 billion) each year to be invested in new mines, and new significant discoveries will also be needed.

That is a massive 64% hike over the average annual spend over the last three decades, and a shortfall of a magnitude that has never been overcome within a decade, Wood Mac says.  The world’s largest copper mine, Escondida, only produces approximately 1Mt copper per year.

Codelco, the world’s largest copper miner, is already able to sell copper in 2023 to European buyers at record highs because of the boycott against Russian supply in the wake of the country’s attack on Ukraine.

The heavyweight is reportedly offering its copper stock in 2023 for $235 a tonne above the benchmark London Metal Exchange price, or 85% higher than what it is selling copper for in 2022.

LME copper is currently fetching around $US7,763 a tonne, which is a nearly 70% increase on where it was 18 months ago.

And Wood Mac expects this growing market deficit, exacerbated by the sharp increase in refined demand growth, to drive prices up to $US11,000/t within five years.

“In theory, higher prices should encourage project sanctioning and more supply. However, the conditions for delivering projects are challenging, with political, social and environmental hurdles higher than ever,” Wood Mac said in an October research report.

This means copper explorers with projects already in the pipeline, particularly in politically stable Tier 1 jurisdictions like Australia, will be in the box seat and on the radar of end users looking to shore up supply.

Even more attractive will be those with porphyry deposits, which host the Earth’s major resources of copper, molybdenum, and rhenium and provide significant amounts of gold, silver, and other metals.

Kincora Copper (ASX:KCC) is preparing to kick off the next phase of drilling at its Trundle project in the Australia’s foremost porphyry region, the Macquarie Arc in the Lachlan Fold Belt (LFB) of New South Wales.

The LFB is well-known as the home to major mines including Newcrest Mining’s (ASX:NCM) Cadia-Ridgeway operation and CMOC’s Northparkes mine.

Cadia is one of the largest and lowest cost mines globally with an endowment of 50Moz of gold and 9.5Mt of copper, while Northparkes is Australia’s second-largest porphyry mine hosting 5.5Moz gold and 4.5Mt copper.

So Kincora is definitely in the right spot to make the next big porphyry discovery and its next phase of drilling is looking to test five targets that all fit that category of having clear potential for a big discovery.

Major NSW porphyry systems occur in a series of deposits, which have often been found in a quick succession of discoveries, Kincora says.

The two initial open pits at Northparkes (E22 and E27) were discovered in less than a year, while Newcrest’s Cadia-Ridgeway and Far East deposits were uncovered within six months and four diamond holes of each other.

Ex-Newcrest explorationist (and discoverer of Cadia) John Holliday noted that Kincora’s Dunn’s North and South prospects were about the same distances apart but had more favourable vectors than what led to the discovery of the initial E22 and E27 deposits at Northparkes.

Game changing discoveries

Porphyry discoveries can be a game changer for a junior explorer. SolGold’s share price rocketed more than 20x after it made a single significant copper-gold porphyry discovery in Ecuador.

The discovery also caught the attention of mining giants BHP (ASX:BHP) and Newcrest, which each took a 13% stake in SolGold.

Robert Friedland’s original Ivanhoe Mines saw a 100x appreciation at the asset level off the back of a series of significant copper-gold porphyry discoveries at the Oyu Tolgoi project in Mongolia.

The Oyu Tolgoi project is currently the focus of a $US3.3 billion cash takeover offer from Rio Tinto.

Having completed almost 30,000m of drilling, Kincora has identified several high-quality porphyry targets that are shallow and large scale.

The results and learnings over the last 2.5 years have significantly increased Kincora’s conviction and confidence in these new targets.

The next phase of drilling at Trundle will test five separate but adjacent zones within an existing 3.2km mineralised corridor.

To put the scale of this 3.2km mineralised system and target zone into perspective, it is the same size as Alkane Resources’ (ASX:ALK) Boda project, which hosts over 10 million oz gold equivalent, and compares favourably to the 4.5km strike at Northparkes.

In a recent research report, Bridge Street Capital analyst Dr Chris Baker noted that the Trundle tenement included an estimated quarter of the Northparkes Igneous Complex, host to the Tier 1 porphyry copper deposits at Northparkes.

“Our measure of success for this program is confirmation of at least one new very significant commercial scale discovery and strongly supporting our thesis that Trundle hosts a quarter of the world-class Northparkes system,” CEO Sam Spring said.

Dr Baker is confident Kincora is strongly leveraged to exploration success, saying the market is paying under $5m for the company’s LFB effort, which “looks quite inexpensive”.

 

 

 

This article was developed in collaboration with Kincora Copper, 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.

Read MoreCopper

Featured Companies

You might be interested in