In the pantheon of mining metals, copper isn’t often regarded as very fashionable – it’s not precious, like gold, or sexy, like the rare earths and critical minerals everyone is looking for in the current moment.
But copper is everywhere, in everything and it’s not going away.
In this article:
- Enduring resource
- Copper in Chile
- Infrastructure is everything
- Copper in a time of uncertainty
- A diversity of options
Great Southern Copper PLC (LSE:GSCU) knows that copper is an enduring resource that literally underpins human civilisation through its use in the electricity grid, transportation and all manner of consumer goods.
The company’s philosophy is discovery by exploration. Specifically, it is targeting copper and copper by-products such as gold and molybdenum, in one of the global capitals of tier-one copper exploration and production – Chile.
“I think there is a global understanding, now, that there's a shortage of copper,” says CEO Sam Garrett. “And that shortage of supply is widening every day.
“And to some extent, that's being driven by global electrification demand – so all these supply issues are building up.”
Garrett says that the supply shortage was already in place before the drive for electrification and that the new impetus is merely compounding the problem.
Copper in Chile
A second issue for the copper supply is that traditional copper mining countries, like Chile, have ageing and over-plundered mines that are exploiting lower grades of copper ore and are therefore becoming more expensive to mine.
“But within Chile, there are still large areas that you can target to optimise your success and minimise your risk.
“Historically, the big miners and explorers have rushed to the high Andes and mountainous areas of Chile, which brings with it a high degree of risk and a high degree of cost because you’re operating at high altitude and away from infrastructure.
“Infrastructure is a very expensive proposition, particularly for junior or micro-cap companies.
“But in Chile, there's the opportunity to explore for copper near to the coast in what's known as the coastal cordillera or the coastal metallogenic belt.”
The coast of Chile is an attractive exploration proposition because of its proximity not only to established large copper, gold and iron mines and good infrastructure but because there are multiple styles of copper deposit to explore for.
“It's not just the porphyry-type deposits up in the higher altitudes,” Garrett explains. “In the coastal areas, we've got porphyry copper deposits, yes. But there are also iron oxide copper gold (IOCG)-type deposits, which are well known in Chile and Peru.
“There are also the structurally controlled and skarn-style deposits (what the trends refer to as manto-style copper deposits) which are typically smaller but higher grade.
Exploring within the coastal belt gives an exploration company plenty of scope. There has been very limited historical exploration in the coastal belt relative to the high Andes and yet there is no shortage of evidence of large-scale copper mining historically and presently.
Infrastructure is everything
And what the coast has that the mountains don’t is access. Not just access to vital infrastructure, like roads and power, but also to downstream development and to the communities full of workers.
“You don't necessarily need to suffer the costs of fly-in fly-out type arrangements, which are very prohibitive and essentially, mean you're employing almost two to three times the workforce you would otherwise require,” Garrett explains.
The other key infrastructure that differentiates working in the high Andes and the coastal belt is access to water.
“These days, in Chile, you're usually required to bring excess water from the coast – which means carting water up to 200 kilometres inland and 3-4 kilometres in elevation,” Garrett says.
“Well, our projects are within 50 kilometres of the coast and less than 1,500 metres above sea level.”
Garrett observes that there have been many explorers in Chile with very small tenement packages and believes Great Southern Copper’s approach of snapping up large project areas will give it the edge.
“We're not just a one or two target company – we've got multiple targets within our Especularita and San Lorenzo projects,” he says. “And as we continue to explore, the numbers of targets will continue to grow. That's one of the benefits of investing in larger project areas.”
Copper in a time of uncertainty
Copper, long seen as the bellwether commodity, is as vital as many of the conductivity minerals being chased today.
“What shareholders need to understand about copper in terms of it being a long-term asset is that copper is the low-cost alternative,” Garrett says. “There is nothing below copper that we can look for that will do the same job.”
“Wherever you look, we're going to need copper in all our technological advances.”
As for the critical minerals boom, Garrett says: “I think there's a tendency in our business for companies to chase a new opportunity – and sometimes that's the right call, don't get me wrong.
“There's plenty of examples of companies that have successfully done that.
“If a good rare earth or lithium project dropped in your lap, you wouldn't ignore it – and that’s what exploration is about. You go out looking for one thing and you find another. That's very common, so you don't want to shoot yourself in the foot.
“Copper, and gold, but copper, in particular, are here to stay. And if you tell your shareholders that’s what you're going to spend their money investing in, then you really should get out there and do that.
“We know there isn’t enough of it – so someone’s got to go out there and find it. We all know that production is not being met by new supply.
“All that should be telling you that in a macro sense, copper prices should stay strong for the foreseeable future.”
As for global uncertainty and the impact of conflict and supply chain risks around the world, copper has the track record to withstand these issues – particularly if it is mined in an environment that investors perceive to be safe.
“You want investors to feel safe,” says Garrett. “First-tier countries such as Australia, Canada, North America, Chile, they're the obvious locations for companies to switch their attention to and enable shareholders to feel that their investments are potentially less risky.
“I think the flip side of that is that you'll get a percentage that are happy to take on more risk and who look to those difficult environments to create long-term leverage with the assumption that conflicts tend to resolve themselves over time.
“That's one philosophy, and it's a legitimate one – but investors have to be able to understand the risks.”
For Garrett’s part, he’s very happy that Great Southern Copper is on safe ground in Chile. “It’s a safe jurisdiction, both geopolitically and domestically, and because of its copper endowment,” he says.
“It's also what we refer to as an advanced economy – in terms of South America, it's undoubtedly the number one economy in the region.
“Mining is a key generator to its GDP and particularly copper mining, and obviously in the future is going to be important for the country.”
Garrett also sees the country’s long-established history of mining as key to its success.
“Both the country and the population understand mining; they understand the importance of mining, to their economy and to their lifestyle. There wouldn't be too many families in Chile who aren't touched in some way by the benefits of mining.”
This adds up to a highly educated workforce with technological know-how and a high level of English competency: “All those small things add up to the big picture, which is that Chile is a great place and a safe place to explore.”
A diversity of options
In the final analysis, the company is confident of its ability to serve up a smorgasbord of copper opportunities in a tier-one jurisdiction.
“We've been extremely successful in identifying targets that give our shareholders the opportunity to enjoy success in both the large-scale, lower-grade type deposits such as porphyry or the IOCG deposits.
“But we've also more recently been identifying the potential for smaller high-grade copper deposits. They're the ones that are very exciting because they have the potential to generate strong income.
“We've got two baskets and within those baskets, we've got a lot of cherries to pick up – and it’s our job now to sift through the cherries, find the best ones and prioritise the ones we want to explore first.
“For example, at the Especularita Project now, we've identified prospects at which we've seen copper grades in outcrop up to almost 7% copper and 13 grams gold.
“They're exciting numbers and we're going to be putting a lot of effort in over the next three to six months to two years to start to pull those systems apart and explore them in a more detailed sense.
“And in parallel, we plan also to continue exploring for those bigger copper projects that are attractive to big players in business. So that gives us a lot of optionality as a small company.”