Copper resurgence benefits juniors

Bill Beament’s decision to leave his role at the helm of one of Australia’s biggest goldminers to join a copper explorer came as a shock to many in the mining sector.

The Northern Star Resources chairman of nearly 14 years – who steered the company towards its $16 billion merger with Saracen Mineral Holdings in February – will join the board of Venturex Resources as an executive director in July.

That deal involves a $37.3 million investment from Mr Beament to Venturex, which owns two copper-zinc projects in Western Australia.

Venturex plans to capitalise on growing demand for copper and other base metals required for everyday appliances like televisions, cars and refrigerators, as well as larger infrastructure developments.

In the main, however, the recent uptick in demand has been driven by the renewables market, with copper used in electric vehicle batteries and wind turbines, among other clean energy products.

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In 2020, revenue from Australia’s copper exports grew to a record $10.4 billion, up from $10.2 billion in the previous year.

And this year, the price of copper exceeded a near-decade high of $US4 per pound (about $US9,500 per tonne).

A global push for clean energy has also benefitted Australian graphite, lithium and rare earths companies, while boosting demand for other metals such as cobalt, nickel and silver.

In the case of copper, however, the industry faces a significant challenge.

“The issue we’re seeing at the moment is there aren’t a great deal of quality copper projects out there, which is part of the problem the majors are facing,” Argonaut research analyst George Ross told Business News.

He said the lack of high-quality copper prospects was prevalent in Australia and, to an extent, globally.

The result was that some of the major producers would leave exploration up to the juniors and form joint ventures once projects were proved up.

Such an example is Perth-based Antipa Minerals, which has separate farm-in agreements in place with Rio Tinto, Newcrest Mining and IGO.

The Rio deal involves Antipa’s Citadel copper-gold project, in WA’s Paterson province in the East Pilbara.

Rio began exploring the project in 2015 and, after finding copper-gold mineralisation at its nearby Winu operations in 2019, proceeded with the next stage of the Antipa farm-in by investing a further $11 million in the Citadel project for a 51 per cent stake.

Later that month, Antipa confirmed Rio would spend a further $14 million exploring Citadel within the next three to five years.

More recently, Rio signed a deal with potash play Agrimin’s exploration subsidiary, Tali Resources, which owns copper-gold tenements in WA.

Rio could earn a 75 per cent stake across the tenements if it spent close to $60 million on exploration.

Meanwhile, prominent producers including Sandfire Resources, which runs the DeGrussa operations in WA, have begun a search for high-quality prospects overseas.

Sandfire gained the T3 (Motheo) copper-silver mine in Botswana through its acquisition of MOD Resources in 2019.

It is developing the proposed 10-year operation through its Tshukuda Metals subsidiary.

Motheo is expected to boost Sandfire’s overall copper production capacity by an initial 3.2 million tonnes per annum, ahead of a planned expansion to 5.2mtpa.

Managing director Karl Simich recently said Motheo was one of the few significant new copper mines under development.

Mr Ross said Sandfire’s case was a good example of the difficulty companies were facing in exploring for copper at home.

However, he noted several hotspots worth revisiting.

Recent discoveries in the Paterson province, for example, have fuelled strong interest in the area from other majors such as Fortescue Metals Group, IGO, Newcrest Mining, and Rio Tinto.

The region is also rich in gold mineralisation, for which copper is often a biproduct.

Nickel producer IGO began searching for copper-cobalt deposits in Paterson in late 2018 through an agreement with explorer Encounter Resources, which owns several prospects in WA and the Northern Territory.

Under that arrangement, IGO could sole-fund $15 million in exploration to earn a 70 per cent JV interest in Encounter’s Yeneena project.

Encounter previously had arrangements in place over its Aileron and West Arunta projects with Victoria’s Newcrest Mining, however, the goldminer recently withdrew from both JVs.

Meanwhile, Rio and iron ore giant Fortescue have committed to copper-gold JVs with Perth-based Carawine Resources.

Fortescue could spend $6 million on exploration to earn a 51 per cent stake in Carawine’s Eider tenement, which forms part of the junior’s larger Paterson project, while Rio could spend $5.5 million for a 70 per cent stake in Carawine’s West Paterson tenements.

Juniors Artemis Resources, De Grey Mining, Sipa Resources, and St George Mining are also active in the region.

Mr Ross said companies had rushed to the underexplored Paterson province after Rio made its 503mt Winu discovery.

He said a similar situation was unfolding in the NT’s Barkly region, where BHP and other majors were revisiting the area which, after historical exploration, was now viewed to be highly prospective for copper mineralisation.

In one instance, BHP has backed Encounter’s Elliot project, for which it could earn up to a 75 per cent JV interest if it spent $22 million on exploration within 10 years.

Mr Ross said juniors were also pursuing large, bulk-tonnage operations overseas.

Cases include WA and NSW companies Hot Chili and Xanadu Mines, which are focused on developing copper projects in Chile and Mongolia, respectively.

“Something all those companies have in common is that they’re after … fairly modest-grade resources that, perhaps in the past, have not been as attractive but are becoming increasingly more attractive because mining methods have changed,” Mr Ross said.

He said part of the issue for explorers was that most surface copper mineralisation had already been identified.

Though, mining methods like ‘block caving’ were helping juniors efficiently complete underground mining at a lower cost.

“In some cases, you can still find copper mineralisation sticking out of the ground, but it’s becoming less and less frequent,” Mr Ross said.

“[Explorers] are relying on testing deposits that are underneath cover, and that cover might be tens of metres or up to 300 metres.

“They take on a lot of risk … because it costs so much money to drill through the cover to get what may or may not be mineralised.”

He said it had taken a while for the industry to find undercover exploration palatable.

“The reason things have changed a bit is that the outlook for copper is very strong, with the EV economy moving forward,” Mr Ross told Business News.

“Hopefully, that drives more exploration and discovery.”

Neil Marston, managing director of Bryah Resources, said copper juniors were finding it easy to raise funding for exploration.

The business raised close to $3 million in 2020, which was largely directed towards exploring Bryah’s namesake project, Bryah Basin.

It sits close to Sandfire’s DeGrussa mine, which currently yields a high-grade of about 4 per cent copper while the nearby Monty satellite deposit runs close to 6 per cent, based on the company’s latest quarterly results.

Neil Marston says it's a good time for copper explorers. Photo: David Henry

Mr Marston said Bryah was exploring for copper mineralisation modelled on those deposits, with Sandfire a potential JV partner if it made a discovery.

“It’s a very good time for us to be out there exploring for copper prospects,” Mr Marston told Business News.

“Companies are finding it quite easy to go to the market and raise money.

“We’ve done a couple of capital raisings in the past 12 months and on every occasion, we could’ve raised three or four times the amount we wanted to.”

Bryah is also focused on developing its manganese asset alongside joint venture partner OM Holdings, which recently raised its stake to 30 per cent.

The project caught the interest of contractor Primero Group and investment firm AMCI in November last year, which together offered to pay $5 million for the asset.

The offer was withdrawn in February, with Bryah noting some conditions weren’t met.

Mr Marston said Bryah would continue to pursue both its manganese and copper strategies.

Though, he agreed a lack of quality copper prospects was an issue for the industry, noting grades were declining globally and many operations were running well under 1 per cent.

“The challenge is with the growing demand for copper,” he said.

“In the past 12 months, there was about 30 million tonnes of new copper production required [to meet demand].

“That’s expected to grow close to 45mtpa by 2040.”

Mr Marston said there was an urgent need for new copper projects to meet growing global demand, which has been increasing by about 700,000t each year.

“We need copper wires for almost everything in our modern lives,” he said.

“The growing demand for copper is what’s driving the price up, and the expectation is that we’re in bit of a supercycle going forward.

“Some people are predicting the copper price in the next 12 months will break all-time records.

“That’s very encouraging for copper explorers and producers in Australia.”