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A copper-led recovery? How the bellwether metal fared in the June quarter

Published 04/08/2022, 02:22 pm
Updated 04/08/2022, 03:00 pm
A copper-led recovery? How the bellwether metal fared in the June quarter
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All eyes have been on copper in recent months as investors try to get a handle on where jittery economies around the world, buffeted by geopolitical headwinds and post-pandemic supply issues, are headed next.

Dubbed ‘Doctor Copper’ by market observers, the reliable base metal is said to be the best yardstick we have for the health of the economy. The last four recessions have been preceded by copper entering a bear market.

Spooky? Not really. The simple explanation for copper’s bellwether status is its wide cross-sector application, featuring in everything from electronics and manufacturing to infrastructure and the grid.

The metal is often alloyed with other metals and most investor portfolios are exposed to it one way or another. The theory goes that when the economy is ticking along nicely, the demand for copper will be high.

Copper – the market outlook

The global market for copper is expected to reach 363.01 million tonnes by 2027 with a compound annual growth rate of 4.21% during the forecast period. Copper is a metal that is often alloyed with other metals.

Australia participates heavily in the copper market, being the third largest exporter of the base metal behind Chile and Peru. We account for 13% of the world’s copper – a market worth around $8.8 billion.

Copper peaked in March but has since fallen prey to the generally bearish sentiment that saw base metals prices fall sharply towards the end of the reporting quarter. Prices seem to be stabilising and some analysts predict a recovery in the months ahead.

Source: Market Index.

The red metal will continue to be in high demand as the world transitions toward green technologies such as EVs and energy grids are upgraded but it will remain to be seen how its fortunes track with the current fears of recession in developed economies.

In the spotlight: ASX copper stocks

Australian copper miners had a busy June quarter. Here we track how they performed and what they got up to in that time.

Cooper Metals

June saw some tidy copper results for Cooper Metals Ltd (ASX:CPM) as it prosecuted its maiden reverse circulation (RC) drilling campaign at the Mt Isa Copper-Gold Project’s King Solomon prospect, including:

  • 18 metres at 1.8% copper and 0.11 g/t gold from 57 metres, including 5 metres at 5.4% copper and 0.31 g/t gold;
  • 7 metres at 1.5% copper and 0.11 g/t gold from 40 metres including 2 metres at 3.5% copper and 0.28 g/t gold; and
  • 17 metres at 1.0% copper and 0.04 g/t gold from 31 metres including 5 metres at 2.6% copper and 0.12 g/t gold.

Managing director Ian Warland said: “The maiden RC drilling program at King Solomon has exceeded our expectations delivering significant shallow copper-gold mineralisation at King Solomon prospect, the first exploration holes ever drilled at the prospect.

“The subsequent IP survey is a potential game changer for King Solomon, successfully mapping known copper-gold mineralisation at King Solomon 1 and it has highlighted a number of other exciting targets for us to follow at King Solomon 2 and 3.

“The September quarter is shaping up to be even better for the company and its shareholders with exciting targets at King Solomon, Python and regional VTEM anomalies to follow-up.”

Watch: Cooper Metals drill-testing King Solomon at Mt Isa East Copper-Gold Project

CPM’s cash balance at June 30 was $3.074 million.

Emmerson Resources

Emmerson Resources Ltd (ASX:ERM) reported visual copper in follow-up drilling at the Hermitage Project during the quarter.

The company intersected 3.4% copper from 116 metres along with a previously unknown ironstone containing a 38-metre interval of mineralisation consisting of malachite, native copper and chalcopyrite, and possibly bornite.

The true thicknesses of these various copper zones identified to date remain unknown and further drilling will be needed to better delineate their full spatial extent.

The company says it is becoming increasingly apparent that there are a number of shallow secondary and also deeper primary copper targets within the Hermitage project.

KGL Resources

During the quarter, copper miner KGL Resources Ltd (ASX:KGL) went through a significant board and management restructure to strengthen the company’s mine development capability at the Jervois Copper Project.

Denis Wood, Jeff Gerard and Steven Rooney with Northern Territory Deputy Chief Minister and Minister for Mining Nicole Manison when they visited the proposed Jervois mine site in June.

The period saw the appointment of Denis Wood as executive chair, Steven Rooney as chief operations officer and Jeff Gerard and Ian Williams, both as non-executive directors.

“I’m pleased we’ve been able to attract such experienced industry professionals to KGL to assist in bringing the Jervois copper project into development,” said Wood.

“We can already see the tangible benefits in terms of their input on optimisation strategies to achieve capital and operational efficiencies as the industry faces an inflationary cost environment. KGL will continue to add to its operational capabilities as the project proceeds along the development pathway.”

Meanwhile, at the mine, extensive optimisation work continues to drive capital and operational efficiencies, with mining, process plant and civil works contracts to be progressed in the second half of the year and financing discussions ongoing.

In April a capital raise added $23.04 million to the company’s coffers and the funds will allow for the completion of a feasibility study. The company’s cash position at June 30 was $23.3 million.

Solis Minerals

In the June quarter, Solis Minerals Ltd (ASX:SLM) continued to expand its footprint into South America, applying for seven concessions in the Tacna Region of Southern Peru, 15 kilometres along trend from Southern Copper Corporation (NYSE:SCCO)’s Toquepala Mine.

The applications lie along the regional Incapuquio Fault system in southern Peru, which is associated with three large copper-molybdenum deposits currently in production - Cuajone, Quellaveco and Toquepala.

The company plans to undertake an extensive program of on-ground mapping and geochemical sampling to better define drilling targets for testing.

With a current cash balance of approximately A$3 million, Solis is well-placed to advance its portfolio of porphyry and IOCG copper projects in Peru, including Ilo Norte and Ilo Este.

The company was released from all further obligations from the vendor of the Mostazal Copper Project in Chile after diamond drilling demonstrated widespread low-grade copper mineralisation associated with manto style mineralisation but did not meet the company’s minimum expectations.

Qmines

QMines Ltd (ASX:QML), which is seeking to become Australia’s first zero-carbon copper and gold developer, had some positive results at Mt Chalmers, where an RC drilling program clips along at a consistent pace.

The company says the program is now consistently delivering 1,800-2,000 metres per month, with 17 RC drill holes for 2,647 metres completed during the quarter.

Results from 14 diamond holes, 12 RC holes and 1 pre-collar hole were received during the quarter, with significant intersections including:

  • 69 metres at 2% copper equivalent from 137 metres including 16 metres at 5.1% copper equivalent from 137 metres and 4 metres at 3.9% copper equivalent from 163 metres;
  • 67 metres at 1.5% copper equivalent from 40 metres;
  • 28 metres at 2.1% copper equivalent from 14 metres; and
  • 40 metres at 1.2% copper equivalent from 76 metres, including 9 metres at 4.1% copper equivalent from 107 metres.

During the quarter, the company progressed a number of carbon abatement initiatives demonstrating its commitment to its goal of net-zero emissions by 2030. It installed two solar-powered noise, dust and vibration monitors at the Mt Chalmers mine site, which will allow QMines to live-track the impact of noise, dust and vibration from its operational activities and work on strategies to reduce its impact.

Solar-powered monitoring is part of QMines' ESG package.

Orion Minerals

During the quarter just gone, Orion Minerals Ltd (ASX:ORN) secured a key funding milestone for the Prieska Copper-Zinc Project in the Northern Cape, negotiating a US$87 million funding package with Canadian streaming and royalty company Triple Flag. This underpins the early production strategy announced last quarter.

Watch: Orion Minerals welcomes A$120 million funding package for Prieska copper zinc project

The company has fielded high-grade results from infill drilling of the +105 Level Crown Pillar, supporting the early production strategy and making early open-pit mining increasingly attractive.

Significant copper assays received to date include 7.46 metres at 9.24% copper and 12.53 metres at 4.89% copper.

In addition, permitting, metallurgical test-work, mine and infrastructure design and community engagement activities progressed at the Okiep Copper Project in the Northern Cape during the quarter.

Castillo Copper

Castillo Copper Ltd (ASX:CCZ) released a maiden mineral resource estimate (MRE) for the BHA Project’s East Zone In the June quarter, which includes 44,260 tonnes of contained copper – 63 million tonnes at 0.07% copper.

It is also tracking at 64 million tonnes at 318 parts per million (ppm) cobalt for 21,556 tonnes contained metal at relatively shallow depths and has focused much of its energies on pursuing the blue mineral in the most recent reporting period.

In June CCZ announced that it granted London-based Hyperion Copper a 12-month option to acquire 100%-owned subsidiary Zed, which owns four projects in Zambia’s copper belt, including the prime Luanshya and Mkushi projects, for £3.75 million (A$6.7 million).

The company sees Hyperion Copper as a strategic partner, committed to developing the exploration potential of the Zambia projects. Hyperion Copper is planning to list on the LSE’s AIM market in the second half of 2022, with benefits to flow to CCZ through its shareholding in Hyperion post listing.

Managing director Dr Dennis Jensen summarised CCZ’s latest strategy: “The board’s strategic intent is to create value for shareholders via developing the core projects. With cobalt remaining over U$$70,000 per tonne, the priority is to extend known mineralisation across the BHA Project’s East and West Zones via targeted drilling campaigns and formalising a clear path to market.

“Similarly, with copper above US$9,000 per tonne, the board will apply the same formula for the Big One deposit within the NWQ Copper Project. Concurrently, the board intends to align with development partners to advance the Cangai Copper Mine and four prospective copper projects in Zambia.”

Aeris Resources

Aeris Resources Ltd (ASX:AIS) has got the Tritton Copper Operations back on track with copper production for the quarter of 5,127 tonnes at AISC of A$5.00 per pound.

Annual production was at 18,581 tonnes at AISC A$5.10 a pound, within production guidance of 18,500 tonnes to 19,500 tonnes with costs slightly above guidance of A$4.60-A$4.85 a pound.

During the June quarter, first stoping ore from the new Budgerygar deposit was delivered to the mill.

The Avoca Tank access decline is now around 70% complete, with first production scheduled for the fourth quarter of the next financial year.

Resource drilling at Kurrajong and Avoca Tank intersected massive sulphides containing high-grade copper mineralisation.

Resource drilling continued at the Constellation deposit and an updated mineral resource estimate is expected in the first quarter of the 2023 financial year.

At the end of the June quarter, Aeris had useable cash and receivables of $141.5 million, an increase of $67.7 million compared to the previous quarter.

During the quarter, Aeris received $100 million from the placement and entitlement offer associated with the Round Oak transaction. The $15 million deferred payment was also made to Evolution Mining as part of the agreement to acquire the Cracow Gold Operation.

Shortly post-quarter, on July 1, Aeris received $17.1 million from the conditional placement to Paradice Investment Management and paid $80 million to Washington H Soul Pattison for the acquisition of Round Oak Minerals. Aeris also accrued $16.9 million in cash and equivalents through the acquisition of Round Oak Minerals.

Sandfire Resources

A busy quarter for Sandfire Resources (ASX:SFR) Ltd saw it acquire the MATSA Mining Operation in Spain and roll out an operational integration program.

During the 2022 financial year, production exceeded guidance and Sandfire’s output included 98,367 tonnes of copper along with 38,907 tonnes of zinc, 4,102 lead, 32,285 ounce of gold and 1.5 million ounces of silver.

In particular, the MATSA Copper Operations contributed to a strong five months with production exceeding guidance, including 30,628 tonnes of copper, among other metals.

The company also recorded strong quarterly mining and processing performance at the DeGrussa Operations despite industry labour shortages and COVID-19 impacts.

During the financial year, the company reported unaudited sales revenue of US$922.7 million and group EBITDA of US$448 million, with operations generating strong cash flows.

In addition, construction of the 3.2-million-tonne-per-annum Motheo Copper Mine in Botswana proceeds on schedule, with first production guided from the 2023 June quarter.

Capital cost guidance has increased by around 10% (US$29.5 million) due to increases in diesel, labour, consumables and other mining costs.

Read more on Proactive Investors AU

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