Before investing everything to know about copper

Aug 24, 2024

Investing in Copper: Key Insights

Introduction

  • Presenter: Michael from Gest
  • Guest: Ian Wallen, Managing Director of Cooper Minerals, copper explorer in Mount Isa region
  • Experience: Over 25 years, member of AIG, Explorer of the Year 2006
  • Purpose: Discuss what to know before investing in copper

Understanding Copper Grades

  • Significant Intercepts:
    • Economic Grades: Typically start at 0.5% copper
    • Grade Meters: Important to assess alongside grades
  • Deposit Types:
    • Porphyry Deposits: Large, low-grade, long intercepts
    • Smaller Deposits: Higher-grade, shorter intercepts
  • Depth Considerations:
    • Open pits: viable to ~300m depth
    • Underground: requires higher grades, e.g., >2% copper

Mineralization Styles

  • Porphyry Deposits:
    • Major source of copper globally
    • Large, low-grade, associated with tectonic boundaries
    • Example: Sandida mine in Chile, Cadia in Australia
  • Iron Oxide Copper Gold (IOCG):
    • Includes magnetite/hematite minerals
    • Examples: Olympic Dam, Ernest Henry
  • Sediment-Hosted Deposits:
    • Found in regions like the Zambian Copper Belt
  • Volcanic Massive Sulfide (VMS):
    • Formed by black smokers in marine environments
    • Generally smaller, higher-grade
  • Iron Sulfide Copper Gold (ISCG):
    • Associated with pyrrhotite and pyrite
    • Example: Eloise deposit

Exploration Techniques

  • Drill Intercepts: Assess context, grade, and width
  • Geophysical Surveys: Use magnetics, gravity, and EM surveys
  • Soil Sampling: Indicative of mineralization; consider context and coherence
  • Rock Chips: May not always reflect depth potential; context is key

Red Flags in Copper Investment

  • Equivalence: Be cautious of poly-metallic deposits; different elements have varying recoveries
  • Native Copper: Can cause processing issues, e.g., clogging machinery
  • Mineral Composition: Elements like arsenic can incur penalties
  • Oxide vs. Sulfide Processing: Oxide zones may be less economical

Specific Exploration Considerations

  • Porphyry vs. IOCG Exploration:
    • Porphyry: Expensive and large-scale drilling
    • IOCG: Consider depth and geophysical signatures
  • Long Sections: Useful for understanding mineralization orientation

Recommendations

  • Consider companies using innovative recovery methods, e.g., in-situ recovery
  • Warra Minerals: Exploring potential porphyry systems

Contact Information

  • Ian Wallen: Contact via Cooper Metals website or provided email

Here are some must-know red flags and key questions to assess the worth of a copper deposit:

Red Flags:

  • Polymetallic Deposits: Be wary of deposits with a high number of different metals in addition to copper. While this might sound promising, each metal can have different recoveries and processing requirements, potentially adding costs and complexity.
  • Native Copper: While it seems like a good thing, high levels of native copper can clog up processing equipment and lead to costly issues.
  • Arsenic or Fluorine Contamination: These elements can result in penalties when selling copper concentrate, reducing the deposit's overall value.
  • High Acid Use: Oxide copper deposits often require acid for extraction. High acid use indicates potentially higher processing costs.
  • Clay-Rich Deposits: These deposits can be problematic for heap leaching, as clay can clog up the leach pad and hinder the process.
  • Lack of Metallurgical Testing: Companies should provide evidence of preliminary metallurgical testing to demonstrate the feasibility of extracting copper from the deposit.
  • Inconsistent Geochemical Data: If soil or rock chip samples show scattered, incoherent copper anomalies, it could indicate a lack of a coherent source at depth.

Key Questions:

  • Mineral Composition: What is the exact mineral composition of the deposit, and are there any potentially problematic elements present?
  • Metallurgical Testing: Has the company conducted metallurgical testing to determine the feasibility of extracting copper from the deposit and what are the estimated recoveries?
  • Processing Costs: What are the estimated processing costs, and are there any potential issues related to acid use, clay content, or other factors?
  • Grade and Intercept: What are the average grades and intercept lengths? How do these compare to benchmarks for the specific mineralization style?
  • Depth and Shape: How deep is the deposit, and what is its overall shape? Are there any geological factors that might make mining challenging?
  • Geophysical Data: Have geophysical surveys been conducted, and do they correlate with the geochemical anomalies?
  • Environmental Impact: What are the company's plans for managing the environmental impact of the project?
  • Land Ownership: Are there any potential issues with land ownership or permits?
  • Funding and Experience: Does the company have sufficient funding and experience to develop the project?
  • Market Outlook: What is the current and future outlook for the copper market?

Remember, investing in exploration companies comes with inherent risks. It's crucial to conduct thorough research, be skeptical of claims, and consider the overall context of a project before making any investment decisions.

Here's a breakdown of how grade, intercept length, and depth intertwine to impact the economic viability of a copper deposit:

Grade:

  • Definition: Grade refers to the concentration of copper within the ore. It's typically expressed as a percentage (e.g., 1% copper means 1 gram of copper per 100 grams of ore).
  • Impact: Higher grades generally mean more copper can be extracted from a given amount of ore, leading to higher potential profitability. However, higher grades are often associated with smaller deposits, requiring careful consideration of overall resource size.

Intercept Length:

  • Definition: Intercept length refers to the continuous length of mineralized rock intersected by a drill hole.
  • Impact: Longer intercepts suggest a larger, potentially more economic deposit. Shorter intercepts might indicate a smaller, potentially less economic deposit, unless they are very high grade.

Depth:

  • Impact:
    • Open Pit Mining: Deeper deposits can be more costly to extract using open pit methods due to increased stripping ratios (the amount of waste rock that needs to be removed to access ore).
    • Underground Mining: Deeper deposits are often more economical for underground mining, as the higher grades required for underground mining can offset the increased costs of deeper development.
    • Overall: Deeper deposits may also require more extensive drilling and exploration to fully understand the resource potential.

Interplay:

  • The "Sweet Spot": The ideal scenario is a deposit with a good combination of high grade, long intercepts, and a depth suitable for the chosen mining method. A shallow, high-grade deposit might be economical for open pit mining, while a deeper, lower-grade deposit might be suitable for underground mining.
  • Economic Thresholds: There are no hard and fast rules for these values. The economic viability of a deposit depends on several factors, including:
    • Metallurgical Recoveries: How efficiently can copper be extracted from the ore?
    • Processing Costs: How much does it cost to extract and refine the copper?
    • Market Prices: What is the current and projected price of copper?
    • Infrastructure: Are there existing roads, power, and other infrastructure nearby to support mining operations?

Key Considerations:

  • Exploration Phase: In the early exploration stages, focus is often on identifying high-grade intercepts to prove the presence of mineralization.
  • Feasibility Study Phase: As exploration progresses, the focus shifts to determining the overall resource size, grade, and potential economic viability.
  • Mining Phase: The chosen mining method (open pit or underground) will be determined by the deposit's characteristics and the economic feasibility of extraction.

By carefully evaluating the interplay of grade, intercept length, and depth, investors can gain a better understanding of the potential economic value of a copper deposit.

These notes provide an overview of the key considerations and insights into investing in copper mining and exploration, covering mineralization styles, grading, exploration techniques, and notable red flags.