How would you evaluate Arizona as a jurisdiction for the mining of copper?
Arizona produces over 70% of the US domestic supply of copper. With the transition towards decarbonization, that demand will only increase exponentially and we see the copper mines in Arizona continuing to be a key player in supplying the growing demand. Of course, like many mining jurisdictions, Arizona has seen supply deficits: the mines are getting older and it takes longer to see deposits come into production. The state of Arizona is very mining friendly and is keen to support new mine coming online
Understanding this is a past-producing asset, can you provide the asset’s recent history?
In 2004, the asset fell into an Arizona state trust that was managed by the Department of Environmental Quality, and the Lands Departments. Over a period of 15 years, the property sat dormant, until in 2019, the site was fully remediated, overseen by the ADEQ. In 2020, we completed the acquisition from the ADEQ, a liability-free, former open pit mine and associated historic data for $6 million, with the understanding that the ASCU team will advance the company to a construction decision. Since the acquisition, we have been diamond drilling around the site to increase the confidence level of copper resources. Today, next to the old open pit, we have two deposits, Cactus West and Cactus East. Just to the south of the pit, we made a discovery last September at Parks/Salyer, that has increased the global resource to 1.6 billion pounds of indicated copper resources and 4.9 billion pounds of inferred copper resources, with a relatively high concentration grade.
In conjunction with that drilling we have been conducting various technical reports. We started with an economic assessment that came out in 2021 which showed an economically viable mine, the Cactus Mine Project. We used the long-term copper price of $3.35 for the financial model, which was well below today’s prices and had an NPV after tax of $312 million. We are now working on a pre-feasibility study, which should come to market during the first quarter of next year, targeting an average annual production targeting 45,000 to 50,000 tons, with a mine life of approximately 30 years. Then we will move to a definitive feasibility study, expected to come out in late 2024. Assuming the project then gets greenlit and funded, add an 18 months construction and development period, and we should have the first copper cathode production by 2026.
Do you think there is room for further exploration in Arizona?
I do. Between Parks/Salyer and Cactus, there is about one kilometer that has not been drilled at depth. And we know the mineralization occurs approximately at 300mts below the surface. So, I think that over time we will have continued exploration success here. Beyond the exploration opportunity at depth, we have also acquired the land extending south from our 2022 Parks/Salyer discovery along the mine trend. We believe through historic data that the mineralization continues south, providing a mineral resource growth opportunity and future operational flexibility.
Is public policy, like the recent Inflation Reduction Act, a facilitating or a mitigating factor for the mining industry in the USA?
Certainly a facilitating factor. The USA is slightly behind in the global green transition, since it has just announced copper as a critical mineral by the Department of Energy, in contrast to the European Union, for example. There are companies lobbying in Washington D.C. to have copper listed as a critical mineral and we are starting to see the effects within the acceptance of copper. We believe this will help open up funding sources and opportunities for emerging copper developers such as ourselves. While ASCU benefits from a State-led permitting process in mining-friendly Arizona, for those reliant on federal permitting, we understand this will also be a benefit. For example, the Biden Administration is investigating ways to speed up the permitting process. As it stands, it takes between 10 and 15 years to go from discovery to production. ASCU is just over a year from construction decision, based on a positive PFS and DFS next year.
Domestically, Arizona supplies approximately 70% of the copper used in the US. We believe that number will grow substantially as the energy transition continues to take hold. Sourcing copper cathodes from a Solvent Extraction/Electrowinning plan, rather than the traditional milling process, will be highly sought after in the coming years, for its cost effective processing, and its lack of smelting and refining a wasteful process from the viewpoint of greenhouse gas emissions.
As an emerging copper developer, seeking to supply copper for the energy transition, we are mindful of minimizing the GHG’s emitted while producing necessary metal for electrical vehicles, solar panels, wind turbines and more.
Why should we consider copper a critical mineral?
Copper is important nowadays not just because of the pressures to make the green energy transition. Copper is everywhere, think of lines transmitting electricity from A to B anywhere in the world, your smartphone, computer, washing machine, TV, and other artifacts we use every day, contain copper elements. Currently we are using between 25 and 30 million tons annually of refined copper. With the energy transition, that will increase towards 50 million tons in the coming decades—that is essentially a doubling of the demand for copper. On the supply side, we are generally seeing the mines getting deeper and with lower grades, while the costs are increasing. To keep those mines afloat and profitable, the copper price will inevitably need to increase. On the exploration side, since great discoveries are not being made, companies will only be incentivized to explore if the price goes up. Additionally, there is no suitable replacement for copper right now. So, given all these factors, we can expect copper to do particularly well in the future.
