2 Copper Stories: Article on Financing and FQM Head Geo Interview2 Copper Stories:
Written By Tshepo Magagane
1. Copper Industry needs to invest USD2.1trn to meet demand
My Transition obsession – as I have said, “Africa missed out on Chinese Steel Production demand driven commodities rally while Australia fully capitalised on this to not only build at a national level but to create local capital pools”.
1. There is no Transition without Copper – you have the Central African Copperbelt, Kaoko Copperbelt and the Kalahari Copperbelt.
2. The DRC is now China’s largest supplier of refined Copper.
3. Grade across the African Copperbelt are higher than grades globally.
4. African tenements / projects are clean v eg US projects will have 3 sets of Royalties before even hitting Resource Definition.
5. Spot, Specialist Mining Private Equity firms have USD17bn of AuM.
6. Less than 3% of that focuses on Africa.
7. Take Zambia – to hit 3Mtpa, 800Ktpa has to come from Independent Projects – what I will call Tier 2 Projects – those projects when they hit production will likely be producing USD400m-1bn of CF each (you are talking about c17projects)
8. It would have cost you each of those projects USD285 to bring that project from Definition (USD5m) to Pre-Feasibility (USD60m) to Feasibility (USD60m) to Project Finance (USD160m) in equity cheques – if you look at the CF generation, these will be recouped in less than 2yrs as worst case scenario
9. The above excludes the inherent financial engineering embedded in Mine Finance that you will definitely be utilising eg Value Accretion at each stage, Structure Commodity Financing, Equity Partner Introductions into those projects
Why every single day, I am having a discussion on how to unlock this capital.
And
Mining done right, WILL unlock the wider economic ecosystems – roads, rail, energy, towns, suppliers – see the Royal Bafokeng case study – from having Royalty entitlements to holding equity in mining companies to creating their own mining company to controlling one of the largest banks in Africa, to being a strategic partner for capital in Telcos, Towers, Education, Water, O&G…
…we can replicate this all across Africa, using mining!!
PS: what the West is really up against; other countries are proper knowledgeable about this stuff:
Putin’s Candidate of Science dissertation (1997 – Saint Petersburg Mining Institute).
The title of Putin’s thesis:
Strategic Planning of the Reproduction of the Mineral Resource Base of a Region under Conditions of the Formation of Market Relations.
Mineral intelligence & strategic planning 1.0.1
2. FQM Head Geo
First Quantum started with 2,000 tons of production.
In Zambia alone, they are about to hit 500,000 tons!
Follow the FQM Geo Head – what he had to say about low grades:
[There are literally hundreds of low grade deposits in the 0.1-0.25% Cu range waiting to be developed if the copper price appreciates (and more importantly the operating margins permit). But the energy involved in mining, hauling, crushing and pulverising this rock to extract the tiny amounts of copper in each tonne is so enormous, and now so expensive and carbon intensive (if that worries you), that one has to wonder if this is really the right direction.]
Chinese moving very smart
But hasnt translated into Exploration space
Majors gun shy in developing deposits
Kamoa last big one (>250ktpa)
Social story pushing out the timelines (or stopping them)
17yrs from a few drill holes to Feasibility
Big miners going into Argentina / Mongolia
Gap in funding gap of juniors
Saw BHP jump into Filo, if there is that discovery in Africa, you will see it
Junior v Major – more about thought process (wonderful juniors / transformation from geochemical surface exploration to more conceptual geophysics exploration which is expensive – needs real commitment – having the funding flow – junior working with Funding Partner – having to go back to the market every few months to raise a million does not work)
Inspired programmes like the BHP one
AI fantastic tool for speeding up process – processing geophysics (much more than through manual – where key comes in)
We need to drill deep holes
Step change in the Copper price for porphyry deposits to work
Sediment based Copper deposits – Central African Copperbelt – where FQM putting efforts
Sulfide leach technique
Exploration has been complimentary to history of FQM – but it grew out of re-processing & exploration was added to that (exploration has found 5Mtpa and brownfield 15Mtpa)
Sentinel had these holes, my boss went bugger it, we will buy it – no resource but build 2bn mine on top of it in 2yrs
Yes, we take a lot of risk
Escondida cant expand forever, grades are going lower, costs are going through the roof
Junior proposals – not top class geoscience, sampling rocks that have been sampled, drilling shallow holes, not conceptualising, rehashing old data, desperate to get intercept news into market
Over-reliance on NPV? – Chinese have it right to focus on revenue and production (dont worry too much about payback)
Costs – Capex tripled / quadrupled in the last 15yrs – USD30k/tpa v Sentinel at USD7k/tpa (Opex has doubled) – 10s billions going into Codelco/BHP just to keep steady (diminishing equation).
