Copper exploration budgets rapidly fell as the super cycle came to an end a decade ago, with the scant exploration spend since then largely brownfield. As the industry again faces boom times it is grappling with declining grades and an absence of new discoveries, and so the purse strings are opening. Arizona Metals' had an upsized C$49.8 million bought deal, Arizona Sonoran Copper's initial public offering on the Toronto Stock Exchange raised C$46.7 million, Hot Chili raised C$33.8 million with its Toronto Stock Exchange Venture IPO, American Pacific Mining had an oversubscribed placement of C$10.1 million, Libero Copper an upsized C$8.3 million and Solis Minerals completed its Australian Stock Exchange IPO and raised A$5.5 million.
At least three other companies are preparing IPO's. CopperEx, with its Exploradora North and Kia Buggy projects, Key Metals with Fiel Rosita and McEwen Copper with its Los Azules project in San Juan, Argentina. "The market loves copper but people are selective. They look at the team and the assets, they are more selective than previously. People are very keen but there is no easy money out there. There is a focus on jurisdiction and the scale potential," David Prins, president and CEO of CopperEx told Mining Journal.
Improved access to finance saw juniors' budgets surge 62% in 2021 to US$4.1 billion across all metals, although majors are still the biggest spenders and account for half of the global exploration budget at $5.6 billion. S&P Global Market Intelligence said the global exploration budget for non-ferrous metals jumped 35% in 2021 to $11.2 billion from $8.3 billion in 2020. However, the firm also noted that fewer resources are dedicated to grassroots exploration with allocations at an all-time low of 24% in 2020 while minesite allocations hit an all-time high of 41%. "When you look at the amount of exploration budgets that go into precious metals versus base metals, and what component actually goes into copper, it's still a very small amount and that's not a problem that's been fixed. Fundamentally, copper supply is not there and it's not going to be there to meet demand for the next 10 years," Teo Dechev, president and CEO of Royalty Generator Mundoro Capital told Mining Journal.
Mundoro Capital has also seen the purse strings open, which specifically signals that funds are increasingly available for grassroots exploration targeting porphyries and deposit styles that can deliver big. "At the beginning of 2021, we started a $1.5 million raise and ended up at $3.5 million although we had subscriptions for around $5 million. That is an example of the appetite in the marketplace," said Dechev.
A key element here is the type of deposit investors are providing funds to explore, the large, long-like deposits that take years to drill and that the large diversified salivate over for their multi-decade production potential.
"If you're going to be in the copper business, you've got to be in the porphyry exploration business. Skarns are not the future of copper; porphyries are and possibly IOCG's and some sediment-hosted systems. That's a tough exploration model to fund as you could spend $20 million on a porphyry and still not know where you are in the system, because they are such monsters," said Dechev.
Rick Trotman, president and CEO of Barksdale Resources agrees. "Those very large, very coveted projects that the major mining companies would be interested in, with billions of tonnes of copper resource above 0.4% or 0.5% copper are incredibly difficult for juniors to push forward so they need very high quality committed capital sponsors like the Lundin's and Ross Beaty's of the world," he said. Or in Mundoro's case funding partners among the world's largest miners.
Trotman also sees space for the smaller, higher-grade deposits. "The other bucket of projects that tend to do well are the higher-grade smaller footprint deposits with manageable capital expectations that a junior company could actually push forward and raise the capital to develop on its own. Those are the types of projects that can have quite a bit of torque and that is what San Javier is, a project that could probably be built for less than $150 million," he said. The poster child of this path is Ero Copper, which has grown to a C$2 billion market capitalisation based on its production in Bahia, Brazil.
With copper prices having established a base over US$4 per pound for the past two years, lower grades are less of an issue as higher prices allow lower cut-off grades, although with the caveat that developers increasingly have to consider the carbon emissions generated from moving an increasing volume of rock. What were low grades a decade ago may now be considered high grade as the average production grade has fallen from about 1% a decade ago to 0.69% now, with cut-offs increasingly around the 0.2% or even 0.15% mark. For explorers, long sub 1% hits can have a big impact such as Solaris Resources and Filo Mining showed in 2021.
With the emerging copper cycle likely to have long legs, and investors increasingly looking to back junior exploration, we start 2022 with the fool's errand of trying to make sense of the plethora of pre-resource copper explorers. While this review is intended to have depth, it cannot be exhaustive, and it will focus on the Americas.
Chile built a leading position in the copper market on the back of massive porphyry deposits and this is the prize newcomers such as CopperEx and Key Metals are chasing. The emergence of new explorers means fears about the impact a Gabriel Boric presidency on mining investment may have may be overstated, or at least explorers are sanguine that given the 10-20-year timeframe to bring a copper exploration project to an investment decision, there is a likelihood of a more mining friendly president being in La Moneda in the future.
"People recognise there will be additional cost structure in Chile under a Boric government, but there won't be appropriation. Tax increases are also happening in Peru and the US. Boric has moved from an extreme left view and picked a road for economic success as to produce the social programmes he promised he needs money and that mainly comes from mining in Chile. He knows that if he crashes the mining industry it would be fatal for him and his plans so he knows he cannot do that," said David Prins, president and CEO of CopperEx.
Prins, who was previously project director for Pretium Resources' Brucejack mine development in British Columbia, Canada also previously worked at the Zaldivar copper mine in Chile. He is joined by other Pretium alumni Joe Ovsenek and Bob Quartermain at CopperEx. The company raised C$6.3 million in mid-2021 and plans to conduct initial drilling at Exploradora Norte this year ahead of an IPO. In addition to Exploradora North, it has the Kia Buggy project, with both in the heart of the Eocene-Oligocene porphyry copper belt which includes the giant Chuquicamata and Escondida copper mines.
"At Exploradora, our drilling is targeting a starter open pit resource of a minimum 100Mt grading 0.7% copper equivalent. We are in a neighbourhood that offers scale and grade, is easy to get to and not too rugged terrain, we can get seawater and there is a transmission line near by, so the project is buildable," said Prins.
Further south, in Region III, Key Metals is starting with a 362.8Mt indicated resource grading 0.4% copper at the Fiel Rosita breccia-skarn-porphyry project it optioned from lithium producer SQM, which completed 52,238m of drilling in 175 holes.
Chile's IOCG belt in the coastal cordillera also holds the promise of hosting more standout mines such as Lundin Mining's Candelaria and Mantos Copper's Manto Verde. In this region, Nobel Resources has embarked upon a 10,000m drilling programme to test five magnetic and coincident IP anomalies at the Algarrobo project, where drilling previously returned 2m grading 1.28% copper. Nearby, it also has the La Salvadora IOCG project where it intends to drill an initial 2,000m on three targets.
Junior exploration in Peru has arguably been stronger in recent years than in Chile with companies like Chakana Copper drilling its Soledad breccia pipe project in the Miocene copper belt in Ancash. It has drilled more than 60,850m to date but got creamed when it issued a maiden inferred resource in January, with its stock trading dpwmn 11%. The underground resource of 4.8Mt grading 0.72g/t gold, 61g/t silver and 0.97% copper and open pittable resource of 1.9Mt grading 1.29g/t gold, 37.1g/t silver and 0.65% copper elicited a market yawn for the contained 130Mlb copper, 190,000oz gold and 11.75Moz silver.
Also in Peru, C3 Metals drilled 23.5m grading 1.86% copper at its Jasperoid project in the Andahuaylas-Yauri porphyry/skarn belt in Cusco along strike from the main skarn where historical drilling returned up to 24.3m grading 5.76% copper and 0.09 grams per tonne gold. A secondary copper enrichment zone has been found with intercepts of 53.24m grading 3.11% copper and 0.46g/t gold.
Hannan Metals has a sediment-hosted copper-silver system at its San Martin project in San Martin with potential for basin scale. Hannan entered into an option and joint venture agreement with Japan Oil, Gas and Metals National Corporation (JOGMEC), under which JOGMEC can earn up to a 75% interest by spending up to $35 million up to the delivery of a feasibility study. Channel sampling highlights include 1m grading 2.1% copper and 29g/t silver. MAX Resource has a similar sediment-hosted target with its Cesar project in Cesar, Colombia with sampling highlights of 14.8% copper and 132g/t silver at Uru and 12.5% copper and 84g/t silver at Conejo. MAX plans to undertake maiden drilling at Cesar in 2022.
Ecuador is also proving to be fertile ground for copper exploration. Australia's Sunstone Metals returned 480.85m grading 0.41g/t gold, 0.15% copper, 3.4% molybdenum and 0.74g/t silver from its El Palmar porphyry.
A confluence of factors has reignited copper exploration in North America including political risk perceptions, strategic metals messaging from governments as well as existing infrastructure. As British Columbia is rising fast as a copper exploration destination, where its political stability and availability of hydroelectric power increasingly attractive. Hydropower means projects in BC have the potential to have industry-leading low carbon footprints, which will prove advantageous when seeking development investment. "Everybody's dismissed BC copper because they say BC porphyries are always the 0.3% copper 0.3g/t gold kind of porphyry and people lift their nose up. I wouldn't be surprised if copper goes to $10/lb and in that case 0.3% BC porphyries are going to make a lot of money," Walter Coles, president and CEO of gold developer Skeena Resources told Mining Journal.
"There's a heck of a lot of good-looking exploration projects in British Columbia that have been unloved for from five to 50 years. Carruthers Pass is an example of that, with the original work done back in 2011 and now it's time for a fresh set of eyes to go back over that project and see what might be there," Craig Parry, executive chair at Vizsla Copper told Mining Journal.
Having been spun-out from Mexican silver explorer Vizsla Silver in 2021, Vizsla Copper has an option on the Carruthers Pass copper-zinc-silver-gold-cobalt volcanic massive sulphide (VMS) project where historical drilling intercepted 3.1m grading 6.2% copper, 5.8% zinc, 2.37g/t gold and 192g/t silver.
Vizsla also has the Blueberry project immediately adjacent to Aurwest Resource's Stars porphyry copper-molybdenum project, which it consolidated in December 2021, by agreeing to buy M3 Metals 50% interest. Stars is contiguous Aurwest's Stellar property and so it consolidated ownership of a 28,294 hectare prospective porphyry camp. Stars has returned similar grades as MPD with a highlight of 204m grading 0.45% copper. Aurwest said it intends to conduct a 3D modelling of all available historical exploration data on the two properties to prepare an exploration programme and budget. Meanwhile, the company is focused on gold exploration in Newfoundland, Canada.
"It was a very good deal that Aurwest has done in a district that is starting to emerge and is part of a larger district around Huckleberry. The M3 Metals discovery hole was 204m grading 0.45% copper and 0.5g/t gold, so pretty good looking intercepts there. We've got some good targets on our own ground at Blueberry there but the area is ripe for consolidation," said Parry.
The MPD project of Discovery Group company Kodiak Copper more than fits bill of the the typical BC deposit. It is located between the Highland Valley and Copper Mountain mines and returned an intercept of 535m grading 0.49% copper and 0.29g/t gold for a 0.76% copper equivalent, which is perhaps why BC stalwart Teck Resources invested C$8 million for a 9.9% stake in the company. Kodiak drilled 21,675m in 2021 and extended the Gate Zone mineralised footprint from 125m to 950m. Some 25,000m of drilling in planned for 2022 at Gate and other targets.
In Northern BC, Brixton Metals' Thorn is a district-scale porphyry copper-gold-molybdenum exploration project where drilling returned 554.7m grading 0.57g/t gold, 0.24% copper and 43.18g/t silver or 1.09% copper equivalent. Brixton counts Eric Sprott, Robert Friedland and Rob McEwen among its shareholders. In addition, Friedland's High Power Exploration has a $44.5 million earn-in agreement on Brixton's Hog Heaven project in Montana, USA, where a maiden drill programme in 2020 returned 82m of sulphide grading 67.09g/t silver, 0.73g/t gold and 0.23% copper.
Also hunting for BC porphyries is Libero Copper whose Big Red project has returned 21m grading 0.86% copper and 0.4g/t gold from near surface and the nearby Big Bulk which returned 97m grading 0.19% copper, 0.97g/t silver and 0.18g/t gold for 0.34% copper equivalent.
Arizona, the Copper State, is copper heartland in the USA which produces 74% of its red metal and is the backbone of Freeport-McMoran's copper operations as well as where other majors have development stage projects, such as Rio Tinto's Resolution and Hudbay Mining's Rosemont. Grassroots exploration is returning, spurred no doubt by moves at a government level for the nation to be less dependent on imports of critical and key metals, such as copper. The newest entrant, Mundoro, branched out from the Western Tetyhan belt in Eastern Europe to explore the Larimide copper belt, together with partner Vale, in what Dechev believes is the first concerted generative exploration effort in the region for years.
"Going into the southwest US is something I've wanted to do for the last five years. There hasn't been a real influx of exploration activity for new copper discoveries. Putting an asset through engineering studies does not mean that there is exploration for new discovery and that's what Mundoro is keen to focus on in the southwest USA. That's going to be undercover exploration, which is what we've been doing for the last 10 years in the Timok region in Serbia so we're using similar exploration techniques, the same expertise and knowledge, and applying it to a belt where most of the recent exploration has focused on near surface," said Dechev.
Mundoro's deal with Vale will fund generative exploration projects under cover in Arizona and New Mexico, with each designated project that results to be covered by a separate option agreement under which Vale can acquire 100% through sole-funding exploration and, upon completion of the option, make aggregate cash payments to Mundoro of $9 million over four milestones and grant to Mundoro a 2% net smelter returns royalty. Mundoro has already generated one property on which Vale has signed an option agreement.
Mundoro is not a sole junior in Arizona. Arizona Metals has a 75,000m expansion drilling programme underway at its Kay VMS with a highlight of 54m grading 1.9% copper, 2.9g/t gold, 5% zinc and 29g/t silver. Bell Copper is exploring Big Sandy, a porphyry copper-molybdenum target and also has the Perseverance porphyry upon which Cordoba Minerals has an earn-in agreement, and is close to taking its interest to 51%. "We have earned a 25% interest and we're in our second phase and we should be meeting the 51% milestone sometime in December . The exploration team have identified anomalies and we're drilling the first hole," Cordoba Minerals president and Sarah Armstrong told Mining Journal.
Barksdale Resources also aims to start drilling in 2022 at its Sunnyside project adjacent to South32's Hermosa project near the border with Mexico, although its main interest is south of the border at San Javier, a shallow copper oxide project. Barksdale completed 5,000m of drilling there in 2021, with intercepts including 105m grading 0.63% copper and 0.4g/t gold. "The goal was to confirm the historical resource and start working towards expansion. We know there's an oxide copper deposit there with some sulphide at depth. Our job was to go in and fill in some rather large gaps within the resource area and start stepping out. We've released maybe the first 20 holes out of a 36-hole programme so once [all the results are back] and all that data is incorporated into the geologic model, we can start working on a resource estimate," Rick Trotman, president and CEO of Barksdale Resources told Mining Journal.
With metallurgical testing underway to show whether the copper is recoverable via simple and cheap recovery methods, Barksdale will potentially be able to publish a preliminary economic assessment before mid-year. "We'll move pretty quickly to push this to a place where we can demonstrate to investors that there'll be a mine and a mine that is cashflow positive and can make money," said Trotman.
Also in the USA, in Montana, American Pacific Mining acquired the Madison project in June 2020 and an earn-in agreement with Rio Tinto, under which the major can invest up to US$30 million to earn 70% of the project. Madison is a porphyry-fed skarn which produced ore grading up to 25-35% copper. Some 4,000m was drilled in 2021 and a magnetic survey was completed. Drilling reported in January returned 6.5m grading 14.44g/t gold and 0.11% copper. "Rio Tinto understands the porphyry copper-gold models better than anyone in the business and they realise that this portion of Montana is well known for porphyry systems, including the very prolific Butte mine which produced 23Blb copper, 700Moz silver and 3Moz gold. This extremely large deposit is located 48km north and on the same structural trend as Madison. This is the type of ore body that Rio is exploring for," American Pacific Mining president Eric Saderholm told Mining Journal.
With a number of junior explorers funded and working in the Americas, 2022 promises to be a year of share pops on drilling.