Diggers and Dealers: Chasing the next ASX copper champion

News.com.au

3 days ago

A void has emerged for mid-tier ASX copper prospects, especially those with domestic assets
Hillgrove Resources MD Bob Fulker says consolidation opportunities could emerge to create the next 30-60,000tpa ASX copper miner
Copper prices don't reflect tight market and surge in demand, which could require 61 new mines in just six years
ASX miners are chasing the major prize of becoming the country's next copper champion, as a void emerges for institutional investors.
Sandfire Resources (ASX:SFR) and large caps BHP (ASX:BHP), Rio Tinto (ASX:RIO) and South32 (ASX:S32) provide some leverage.
But pure plays are becoming few and far between, with Rex Minerals (ASX:RXM), MAC Copper (ASX:MAC), New World Resources (ASX:NWC) and Xanadu Mines (ASX:XAM) all either taken over or on the way out.
Hillgrove Resources (ASX:HGO) managing director Bob Fulker laid out the ambition of companies in the small cap space, with the owner of South Australia's Kanmantoo mine hoping to use that asset as a launching pad to become a 30,000-60,000tpa mid-tier miner.
The operation is expected to produce 12-14,000t Cu at US$3.40-3.90/lb all in costs in 2025. HGO's aim is to increase underground development so it can eventually fill half of the mine's 3.6Mtpa processing plant.
"Kanmantoo at 1.8Mtpa would be making great money," Fulker said.
The extra cash flow would enable HGO to use Kanmantoo as a launching pad for M&A. Fulker thinks the ASX is ready for consolidation to create a local mid-tier that, like Sandfire in times gone by, had the clout to compete with overseas raiders.
"We are ready for some consolidation to get that 30-60,000 tonnes producer (one the ASX)," he said on the sidelines of the Diggers and Dealers conference in Kalgoorlie.
"To get there, we will start to compete again with the overseas (companies).
"There is movement in the Australian market that can be had.
"It's a pretty bold statement for myself to say I want to be a mid-tier … I'm a $100 million (market cap).
" It's a big shift. But I do believe that with the combination of a couple of companies, the acquisition of a couple of projects (it could happen)."
Please sir, I want some more
Everyone wants more copper if they can, the question is whether you can get it and at what cost.
Evolution Mining (ASX:EVN) made a canny move into the space back in 2021 when they secured all of the Ernest Henry copper and gold mine in Queensland from Glencore.
That was followed by a deal to acquire China Molybdenum's Northparkes mine in NSW, which means 25% of its revenue now comes from the red metal.
MD Lawrie Conway noted the company's status as a gold miner meant it needed to ensure 60% of revenue came from gold to satisfy the criteria of its precious metals-focused instos.
If something akin to Ernest Henry or Northparkes were to emerge, EVN would be keen to add more, especially with Conway warning gold prices would come off record highs at some point.
The question is whether an asset of that quality is on offer in the Australian market right now.
"There's got to be 61 new mines brought into production over the next five to six years to meet the demand for copper," he said.
"Therefore, eventually you'll have the short term hit that we're seeing now because of a potential recession in the US. That copper price will go up and will go up materially over the next five to 10 years.
"We've got capacity there. I think at the moment it would be fairly competitive in the copper space if there was an asset like that. But yeah, I think it's certainly a good fit for us if we were having more copper in the portfolio."
Copper that
Yet the feeling of experts is that the price of copper is not yet reflecting the remarkable demand story expected to unfold in the years ahead.
That has been further supported by the maelstrom caused by Donald Trump's innately confusing tariffs.
Having expected a charge on copper cathode imports – mostly affecting exports from the US' largest supplier Chile – American-based traders led a run on copper metal imports into Comex and Nymex warehouses in the first half of the year.
That opened a massive arbitrage between US and LME copper pricing, which firmly closed this month when a 50% tariff focused instead on semi-finished products and derivatives.
Refined copper imports, recommended to be phased in over 2027 and 2028 by the Department of Commerce, have not been confirmed.
That shock sent US prices tumbling back to parity with the LME – from over US$5.50/lb to US$4.38/lb.
But what that run has done is dramatically weaken LME stockpiles.
On June 30 they fell to a two-year low of 90,625t, barely more than a day's worth of global demand. They've since recovered to over 150,000t, still a level best described as 'strained'.
Liam Twigger, one of WA's top mining experts and executive director at Perth broker Argonaut, says copper prices will need to rise to support demand growth.
"The copper price at the moment isn't reflecting the outlook for demand. If you believe in the energy transition, the amount of copper that the world needs is off the scale," he told Stockhead.
"But the copper price still remains fairly subdued. Stockpiles around the world are okay, but I think we're so used to this just in time thought piece where ... no one holds any inventory.
"(Buyers think) if I need it, I'll just go to the warehouse and get some copper stocks. Well, the stockpiles, given the demand outlook, won't last. So ultimately it's got to feed through to a higher copper price."
Twigger says the ASX copper space is ripe for consolidation, with economies of scale a necessity to garner investor interest and increase margins.
"I think Cobar is one region that's a standout for consolidation. The other one is Queensland and there are a lot of juniors there," he said.
"There's a lot of infrastructure, there's strategic infrastructure that could be leveraged more by making some acquisitions.
" Rather than people building their own plants, I think you could make more use of some of the plants that are maybe underutilised."
Speaking on Tuesday, Carnaby Resources chair Peter Bowler said there "has to be" a case for consolidation of the Mt Isa district in Queensland, where Glencore is mulling the potential closure of its iconic but loss-making smelter.
He pointed out Aussie copper miners had been "dropping like nine pins" to M&A.
Bowler said Carnaby would be mining this time next year to deliver ore that will generate a "clean" concentrate from its Great Duchess project for toll treating by Glencore.