Last week, I wrote about the demand-supply situation for copper. The red metal is crucial to the transition to cleaner’ energy sources, and ‘decarbonisation’ in general, but the paradox is that there is only a trickle of new copper production coming the market, because it is becoming more difficult to find high-grade copper. Here are four speculative ASX-listed companies that have it – with two of them being producers. The stock price trajectories might not inspire confidence; but I encourage readers to do their own research on these companies and gain an understanding of how valuable their copper deposits could prove to be.
- Hot Chilli (HCH, 79 cents)
Market capitalisation: $120 million
12-month total return: –41.9%
3-year total return: –29.4% a year
FY25 Estimated Yield: no dividend expected
FY25 Estimated P/E ratio: n/a
Analysts’ consensus target price: n/a
Hot Chilli is an Australian copper developer that is focusing on its large Costa Fuego copper-gold project in Chile, which the company describes as one of the top ten undeveloped copper resources in the world, and one of the very few globally significant copper developments not owned by a major mining company which could deliver meaningful new copper supply this decade.
The basis for this claim is a current indicated resource of 798 million tonnes at a grade of 0.45% copper equivalent, for 3.62 million tonnes of copper equivalent, made up of 2.9 million tonnes of copper, 2.6 million ounces of gold, 12.9 million ounces of silver and 68,000 tonnes of molybdenum.
On top of that, there is an inferred resource of 203 million tonnes at a grade of 0.31% copper equivalent, for a further 630,000 tonnes of copper equivalent, comprising 500,000 tonnes of copper, Cu, 400,000 ounces of gold, 2.4 million ounces of silver 12,000 tonnes of molybdenum. About 80% of the resource can be mined as an open pit and the remainder as an underground mine.
More than 85% of Costa Fuego’s resource estimate is now classified as indicated. An ‘indicated’ resource is a result of a drilling program on the orebody and represents the mineral resources that have a high certainty of being there; ‘inferred’ resources are effectively an educated guess, relying on seismic data and what the drilling program showed of the geology of the area being studied. Further exploration data can move the indicated resource up the ladder of likelihood to a ‘measured’ resource, which is assumed to be fully bankable, and able to be converted to an ore reserve – the part of the resource the company intends to mine – which is usually determined by a definitive feasibility study (DFS).
The initial mine life is put at 16 years, for open pit and underground operations, producing 95,000 tonnes of copper a year and 49,000 ounces of gold a year for the first 14 years, or average production of 112,000 tonnes of copper equivalent. The cash cost of production is projected at US$1.33 a pound, net of by-product credits. The project is expected to produce total revenue of $13.5 billion and total free cash flow of $3.28 billion (post-tax, after operating costs, capital costs, and royalties).
Costa Fuego has been outlined as a low-risk, low-cost and long-life copper project in a country that is the world’s largest copper producer. Post-tax, Hot Chilli’s preliminary economic assessment (PEA) says Costa Fuego could be worth US$1.1 billion ($1.6 billion) to it – versus its ASX market capitalisation of $124 million. Hot Chili is on-track to deliver pre-feasibility study (PFS) in the second half of calendar 2024. The company expects to deliver a definitive feasibility study (DFS) in the first half of calendar 2026, with a decision to mine, and project financing to follow in the December quarter of 2026. Hot Chilli could be just a few years away from becoming a 100,000-tonnes-a-year copper producer – along with gold, molybdenum and silver by-products.
Another interesting part of the Costa Fuego project is its access to water: Costa Fuego is one of the few copper development projects globally that has a water extraction licence, from the sea. Hot Chili has also secured most of the easement and surface rights required for pipeline development. The company started this work to guarantee its sea water permits for Costa Fuego, but the water assets have transformed into a potential water business capable of supplying the entire Huasco Valley region with both seawater and desalinated water. In July, Hot Chilli established a stand-alone water company called Huasco Water, in a joint venture with CMP, the mining arm of Chilean iron ore and steel group CAP SA, which owns 20%. CMP will use the JV’s desalinated water at its Los Colorados iron ore mine. Huasco Water is talking to other potential customers in the area for desalinated water, including agricultural and community customers, and water infrastructure partners.
The Huasco Valley, and the Atacama region in general, is one of the most water-stressed regions of the world. Water scarcity is one of the biggest obstacles facing new global copper supply. The Huasco Valley region contains six major undeveloped copper projects and two new, large-scale copper discoveries, with all projects requiring desalinated water supply. Hot Chilli is now positioning itself as having a promising future in two critical commodities – copper and water.
My normal source of analysts’ consensus target price, Stock Doctor/Refinitiv, does not have a rating for Hot Chilli; but financial information website Wallmine gives a consensus one-year price target of $5.00 (it does not list how many analysts’ recommendations it uses).
- 29 Metals (29M, 33 cents)
Market capitalisation: $231 million
12-month total return: –55.1%
3-year total return: –48% a year
FY25 Estimated Yield: no dividend expected
FY25 Estimated P/E ratio: n/a
Analysts’ consensus target price: n/a
You have to feel for 29 Metals, which operates two long-life copper mines, one in Western Australia (Golden Grove) and one in Queensland (Capricorn Copper) – the Capricorn Copper mine in north-west Queensland was put out of business by floods in March 2023, and operations did not resume until September 2023, with operations at the Esperanza South underground mine at Capricorn delayed until 2024.
Then, in March 2024, consecutive tropical cyclones flooded its operations again, with the de-watering of Esperanza South delayed by another flooding. The water levels on site returned to levels similar to those of March 2023, which the company had called an “extreme weather event.”
In the circumstances, it was very creditable that, in the half-year to June 2024, total copper production increased by 42% on the level of June 2023, to 14,200 tonnes, as Golden Grove boosted production by 65%, to 12,200 tonnes, from higher-grade copper ore milled; and Capricorn contributed 2,000 tonnes before operations were suspended. Zinc production from Golden Grove was down 10%, to 20,000 tonnes.
With major exploration potential around both Golden Grove and Capricorn, as well as the company’s Redhill tenement in Chile – which contains an historic mine site with significant known high-grade copper, gold and silver mineralisation – there is plenty of scope to extend reserves and mine-life.
The contained metal in the ore reserves is estimated at 540,000 tonnes of copper, 744,000 tonnes of zinc, 330,000 ounces of gold, 19 million ounces of silver, and 37,000 tonnes of lead.
29Metals has plenty of work to do to get back to full production, but as a copper producer, its future beyond that looks bright.
Wallmine gives a consensus one-year price target of $2.00
- Hillgrove Resources (HGO, 4.9 cents)
Market capitalisation: $103 million
12-month total performance: –23.4%
Three-year total performance: –12% a year
FY25 (December) Estimated Yield: no dividend expected
FY25 (December) Estimated P/E ratio: 1.8 times earnings
Analysts’ consensus target price: n/a
Hillgrove owns the Kanmantoo copper-gold mine in the south-east of South Australia, which operated from 1971 to 1976 as an open-pit and underground operation and was subsequently operated by Hillgrove as an open-pit mine between 2011-2019, before the company put it into care and maintenance.
But while the operation was suspended, Hillgrove had a look through a drilling program underneath the open pit, and quickly realised that it had a potential one-million-tonne resource down there. So, it quickly developed a four-year mine plan and committed to the restart of copper production at Kanmantoo. On schedule, in February 2024, the processing plant was recommissioned and copper production recommenced. From 239 tonnes produced in February, Hillgrove ramped that up to 589 tonnes in March, and then to 719 tonnes in April. By June, what Hillgrove describes as “commercial production” was reached, with more than 1,000 tonnes of copper produced. For the June 2024 quarter, the total was 2,584 tonnes.
The company’s return to production couldn’t have come at a better time, in terms of the copper price.
- Caravel Minerals (CVV, 14.5 cents)
Market capitalisation: $76 million
12-month total return: –12.1%
3-year total return: –33.5% a year
FY25 Estimated Yield: no dividend expected
FY25 Estimated P/E ratio: n/a
Analysts’ consensus target price: 68 cents (Stock Doctor/Refinitiv, one analyst)
Caravel is developing what it bills as Australia’s largest undeveloped copper project, its namesake project in Western Australia. Discovered in 2016, Caravel is the fourth largest copper discovery made in the world in the last decade. Located in the state’s Wheatbelt region, the project hosts a resource put at 1.18 billion tonnes at 0.24% copper and 48 parts per million (ppm) molybdenum, giving 2.84 million tonnes of contained copper. Broker Canaccord Genuity estimates the project as larger than that: it puts it at 1.28 billion tonnes at 0.24% copper, to yield for 3.03 million tonnes of contained copper.
In global terms, the broker says this resource places Caravel in the top 20 active development projects, held outside the majors. The preliminary feasibility study (PFS) and subsequent updates outline a 25-year mine life, processing 30Mtpa to yield about 60 tonnes a year of copper.
Caravel plans to mine the deposit by open-pit, low-cost, bulk mining, and process the ore through an industry-proven conventional copper concentrator to produce a high-quality copper concentrate product. On current estimates, the project will operate for more than 28 years, producing about 65,000 tonnes of copper-in-concentrate a year – augmented by some precious metal production, as well as 900 tonnes a year of molybdenum-in-concentrate – to be transported by truck to either Bunbury or Geraldton Port for export.
Caravel is completing an updated mine plan; next will come a definitive feasibility study (DFS), followed by a final investment decision (FID) before construction of the open pit mine can start.
Caravel submitted the Environmental Review Document (ERD) to the Environmental Protection Authority (EPA) for the project in May. Broker Canaccord Genuity says this is a significant milestone in the permitting process for the project and paves the way for the granting of a mining licence by the end of the 2025 calendar year.
Canaccord Genuity says the stock is a speculative buy; it has a 65-cent price target on CVV.
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