The surge in demand for copper, dubbed "the new oil" by Goldman Sachs (NYSE:GS), has ignited a bullish outlook on the metal. Peru, renowned as the world's second largest copper producer, finds itself at a pivotal junction amidst rising [TA1] copper prices.
The prevailing sentiment suggests an untapped reservoir of potential within the nation, capable of significantly augmenting its current copper output.
It’s a compelling scenario for a company wanting to make a name for itself in the copper space – as long as it has the right tools to succeed in Peru.
For Western Metallica Resources Corp. (TSX-V:WMS), the prospects in Peru proved too enticing to ignore. Formerly a precious metals-focused exploration company with assets in Spain, Toronto-based Western Metallica recently finalized a strategic acquisition to add the highly promising Caña Brava and Turmalina projects, located in northern Peru, to their broad portfolio of copper-gold assets. These projects serve as pivotal stepping stones: they align seamlessly with Western Metallica’s strategic vision to diversify beyond its current Spanish foothold and venture into one of the world's key copper-producing regions.
Western Metallica’s CEO Gregory Duras told Proactive that the acquisitions are highly attractive due to their substantial potential for copper porphyry, a significant type of deposit typically associated with large-scale open-pit operations. After careful consideration, the firm proceeded with an all-share transaction of 20 million shares and five million warrants priced at $0.10 to Consolidated Copper, a private firm which held the Peruvian mineral assets.
“It became clear that this was a pivotal moment for us to shift our focus towards copper and steer the company in that direction,” Duras said.
Compelling data that the firm gathered from its initial copper exploration in Europe encouraged it to pivot towards a copper-centric approach, he added.
Western Metallica CEO Greg Duras
The new assets
Spanning an extensive 4,900 hectares (2,400 hectares granted to date), the Caña Brava project presents significant potential for medium-sized, above-average grade porphyry copper-molybdenum systems. Its vast area showcases visible mineralization and distinct alteration patterns. Particularly, the westernmost porphyry center, El Sausal, displays promising copper grades near the surface.
At around 2,420 hectares (2,220 hectares granted to date), the Turmalina project stands as a historic high-grade copper-molybdenum mining site, featuring one of three known breccia pipes. These pipes hint at a substantial porphyry system lying beneath the surface, presenting a compelling case for systematic exploration and drill testing. The rich history of high-grade mining further underscores Turmalina's potential as a treasure trove of valuable copper-molybdenum resources, in line with Western Metallica's growth objectives.
“Initially, Turmalina stood out due to its rich historical data and the immense geological potential it held,” Duras said. “The geologists were convinced that these properties showcased exceptional qualities, considering geological potential, price, as well as social and operational considerations, including the viable permitting framework.”
Both projects lie in a region of compelling interest, on a copper-porphyry belt that has seen notable exploration and production success, but with much of the central and northern portions of the belt remaining significantly under-explored. The presence of major players like Rio Tinto, First Quantum and Hudbay Minerals in the vicinity of Caña Brava and Turmalina further reinforces the potential of these projects in a region known for its rich mineral potential.
A production powerhouse
Peru, holding the position of the world's second-largest copper producer after Chile, has witnessed a remarkable 20% surge in copper output during the first half of 2023. This growth can be attributed to the launch of new projects and expansions within the country's mining sector.
“Peru is really elephant country for copper,” Duras noted.
As copper demand heats up globally, companies are noting Peru’s unique operating environment. In fact, during his last visit, Duras took note of the number of foreign entities in Peru looking for potential company-makers in a proven region.
“There was a period about two years ago when there was a lot of social unrest in Argentina, Chile, and Ecuador, where Peru managed to get through that quite well – I would say better than its neighbors,” said Duras.
“They’ve also revamped their mining laws and incentivized the local communities to embrace foreign companies, and made it attractive for foreign investments as well, with a very transparent permitting framework.”
Western Metallica has started building a team in Lima. “We've set up offices and established administrative infrastructure, all ready to go,” Duras said.
In addition to the technical aspects, Duras and the team are keenly aware of the importance of addressing social issues.
“Respecting the local communities and acknowledging our role as guests in their country and villages is paramount. We plan to engage with the local population, building relationships and understanding their needs,” Duras said. “Our goal is to collaborate with them in the development process, demonstrating our commitment to responsible resource development.”
The company is hitting the ground running to get work on these projects moving. In the next few months, the focus is on developing access points, conducting GIS work, performing basic geological mapping, and initiating the drill permitting process, which should take approximately six to eight months.
Capitalizing on opportune market conditions
The increasing demand for copper due to its critical role in electric vehicle technology and renewable energy infrastructure made this mineral an attractive focus for many companies. As the world accelerates its transition towards cleaner energy sources, the demand for copper is expected to soar.
The emerging narrative around electric vehicles is a driving force behind copper’s resurgence. “When you delve into the literature, it's evident that the demand for metals is vastly outpacing the supply, projecting a concerning gap that may persist until 2050,” Duras explained.
“What appeals to me about copper is the numerous incentives offered, especially in Europe, where governments are keen on supporting mining and the production of essential metals. There are grants and favorable financing options to foster project development.”
Even from an industrial perspective, copper holds immense strength. Its utility extends beyond power lines to various applications, providing stability in its demand.
“I prefer a pure copper narrative, acknowledging the challenges of polymetallic deposits,” Duras said.
With the successful acquisition of Consolidated Copper behind it, Western Metallica is strategically positioned to capitalize on the burgeoning demand for copper. The Caña Brava and Turmalina projects in Peru seamlessly integrate into the company’s existing portfolio, offering immense potential for exploration, development, and long-term growth.
Duras is genuinely excited about Western Metallica’s promising future prospects stemming from its existing assets. The company has no financing pressure and is well capitalized to advance near term exploration plans. The CEO is a significant buyer of the stock, holding over 10 million shares. No one can say that Duras isn’t putting his money where his mouth is.
“Our potential for significant returns in the next year to 18 months is substantial, particularly upon hitting that first discovery hole,” he said. “That, in my view, will be a pivotal moment for us, propelling our company's value to levels easily justifying a much higher market capitalization.”
