Kristie Batten: Prospect gets big backing for copper hunt

News.com.au

27-04-2025

One of Australia's top mining journalists, Kristie Batten writes for Stockhead every week in her regular column placing a watchful eye on the movers and shakers of the small cap resources scene.
Thanks to backing from a global copper major, Prospect Resources (ASX:PSC) now has $20 million to continue to unlock the potential of its Mumbezhi copper project in Zambia.
Earlier this month, Prospect announced that it had entered into an investment agreement with First Quantum Minerals for a $15.2 million placement at 15c per share, which was a 36% premium to the company's share price at the time.
The investment, which closed last week, gave FQM a 15% stake in Prospect and the right to appoint a director to its board.
Prospect's largest shareholder, Singapore-based family office Eagle Eye Asset Holdings, subscribed for an additional $2.8 million worth of shares at the same price in order to maintain its 15.3% stake.
The $18.5 million in proceeds is in addition to the $6.5 million Prospect had in the bank at the end of March.
Mumbezhi emerging
Following a phase one drilling program in the second half of 2024, Prospect reported the initial resource for its Mumbezhi project in northern Zambia last month.
The project's Nyungu Central and Kabikupa deposits have an indicated and inferred resource of 107.2 million tonnes at 0.5% copper for 515,000 tonnes of contained copper, based on a 0.2% copper cut-off grade.
The resource includes a higher-grade component of 69Mt at 0.53% copper at Nyungu Central and 18Mt at 0.57% copper at Kabikupa, using a 0.3% cut-off.
Prospect also reported an updated exploration target of 420Mt to 1.05 billion tonnes at 0.4-0.6% copper.
Canaccord Genuity analyst Tim Hoff noted that if the midpoint of the exploration target was delivered, it would be the largest copper deposit amongst ASX-listed developers.
As part of the FQM investment, the Canadian miner will support Prospect's exploration efforts with the pair to form a technical working group.
The phase two drilling program at Mumbezhi is due to begin later this quarter.
The program will target further extension to the resources at Nyungu Central and Kabikupa and test the Nyungu North and West Mwombezhi targets.
Prospect has agreed to spend at least US$2.5 million of the funds raised from FQM on exploration outside Nyungu Central.
'We believe Prospect is well-placed to replicate the success it has had at Nyungu Central,' Hoff said.
Processing solution clear
Mumbezhi sits just 25km to the southwest of FQM's Sentinel copper operation and sits in the same geological setting.
On Thursday, FQM reported March quarter production of 46,000t of copper at cash costs US$2.55 per pound at Sentinel.
Despite a soft quarter due to rainfall, FQM maintained 2025 guidance of 200,000-230,000t for Sentinel.
In March, Hoff highlighted the potential of Mumbezhi to provide potential feed to the 62Mt per annum Sentinel operation.
'On its current life-of-mine plan, the operation's grades are expected to fall from 0.5% copper to 0.3% copper in 2029 and will run out of ore in 2034,' he said.
'We believe that a large-scale resource, next door to this level of infrastructure, will become a 'must-have' in order to maintain production levels.
'Based on two production scenarios (10Mtpa and 20Mtpa) that we ran, we believe feeding supplementary ore from Mumbezhi could add an incremental US$439-607 million in value to the Sentinel operations.'
FQM also owns the Kansanshi operation in Zambia and more than 400,000t per annum of smelting capacity.
FQM has previously shown it is a fan of partnerships, as evidenced by the introduction of POSCO at its now-mothballed Ravensthorpe nickel operation in Western Australia and a partnership with Rio Tinto at the La Granja copper project in Peru.
On a conference call on Thursday, management confirmed it was investigating the introduction of a partner to its Zambian business.
While the introduction of a partner is designed to strengthen FQM's balance sheet and reduce its hefty net debt of US$5.8 billion at March 31, it would also likely accelerate investment in the Zambian operations.
'The fact that Zambia has made really positive strides in recent years to reform its mining sector has attracted interest from different parts of the world, and we are seeing if that might eventuate into a sensible partnership,' FQM chief financial officer Ryan MacWilliam said.
Hoff has a speculative buy rating for Prospect and a 40c price target, 166% higher than its 15c closing price on Thursday.