Copper is "the new oil” because the critical role that the red metal will play in achieving the Paris Agreement’s goal of limiting global warming to well below 2 degrees celsius cannot be overstated, according to a report by Goldman Sachs Research.
Per the report, as the world shifts from a production system based on the chemical energy of hydrocarbons such as oil and gas to one based on a range of sustainable sources including solar and wind, copper has the necessary physical properties to play a crucial role in transforming and transmitting this energy into its useful final state.
Goldman Sachs (NYSE:GS) analysts have estimated that by 2030 that copper demand is expected to grow by nearly 600% to 5.4 million tonnes in a base case and 900% to 8.7 million tonnes in the case of hyper-adoption of green technologies. As such, the 2020s are expected to be the strongest phase of volume growth in global copper demand in history.
READ: Nevada Copper updates on restart activities at Pumpkin Hollow and proposed financing package
“We now estimate a long-term supply gap of 8.2 million tonnes by 2030, twice the size of the gap that triggered the bull market in copper in the early 2000s,” Goldman Sachs analysts wrote in the report.
Nevada Copper Corp (TSX:NCU, OTC:NEVDF) is working to meet this forecast surge in copper demand with its dual-asset Pumpkin Hollow copper-gold-silver project in Yerington, Nevada.
The 10,680-acre site includes an underground mine and processing facility that the company plans to ramp up following a pause in production. In addition, a large-scale, fully-permitted open pit mine development located four kilometres west of the underground mine is advancing towards feasibility status.
According to Nevada Copper’s 2019 NI 43-101 Technical Report, over its 13.5-year mine life, the underground mine will produce an annual average of 50 million pounds of copper, 8,000 ounces of gold, and 150,000 ounces of silver, with an extension potential of 636 million pounds of copper in inferred resources.
De-risking the path to production
Nevada Copper in August 2022 announced that it had secured up to US$93 million from key financing partners to support the restart and ramp-up of its underground mine, which is estimated to cost between US$70 million and US$75 million.
The company sought additional funding for its operations following an encounter with a weak rock structure in the main ramp to the East South zone of the underground mine, which restricted access to the planned East South stoping zones.
The restart plan is intended to de-risk the path to full-scale production by focusing on debottlenecking and completion of critical capital projects, in addition to the build-up of significant stope ore inventory, to facilitate a more efficient ramp-up upon mill restart and to reduce cash burn during the ramp-up period.
READ: Nevada Copper announces significant proposed financing package and restart plan for Pumpkin Hollow copper mine
"We have made significant progress in developing the plans, recruiting the people and implementing the systems necessary to derisk the restart,” said Nevada Copper CEO Randy Buffington in a statement on September 27, 2022.
“We believe that taking a careful, phased approach to restarting the mine removes some of the bottlenecks the operation has faced in the past and will facilitate a rapid ramp-up to nameplate capacity once the mill restarts in mid-2023.”
Key components of the restart plan include changes to the underground mining contractor arrangements to improve the performance of ramp-up activities with an ultimate goal of transitioning certain underground mining activities to be company-performed; the second dike crossing scheduled to be completed during 3Q 2022 and the final dike crossing scheduled to be completed by the end of 2022; and stoping in the higher grade East North mining zone scheduled to commence in 2Q 2023.
If the restart plan stays on schedule, with the mill restart commencing in the third quarter of 2023, the company said it anticipates that underground production would ramp up to hoisting rates of approximately 3,000 tons per day (tpd) during that quarter, increasing to 5,000 tpd in 4Q 2023.
Building a new US copper district
With its more advanced assets in the safe jurisdiction of Nevada, which was ranked the top mining jurisdiction based on investment attractiveness in 2020 by the Fraser Institute in its annual survey, Nevada Copper’s goal is to build a new US copper district.
In addition to the restart of its underground mine, the company plans to achieve this goal by advancing its fully-permitted open-pit project and the staged exploration of targets across the property.
Despite being located in a past-producing copper district, much of Pumpkin Hollow is unexplored. While the company’s core focus is on its underground mine and open pit developments, Nevada Copper has commenced exploration activities, including the forming of a Geological Advisory Council consisting of experts with knowledge of the region; mapping, sampling, and geophysics; and drill testing key targets.
READ: Nevada Copper provides update on its Pumpkin Hollow mine for which it is seeking substantial mine financing
Giving the company an edge over other copper-focused miners is the fact that Pumpkin Hollow is the only copper project of scale that is ready to build in North America.
This puts Nevada Copper in an advantageous position as, per Goldman Sachs’ report, copper is a predominantly long-cycle commodity, typically taking between two to three years to extend an existing mine and as long as eight years to establish a new greenfield project.
As Nevada Copper also highlights, remaining copper growth opportunities worldwide are otherwise limited to high-risk projects like block caves or are located in challenging jurisdictions, such as Mongolia, or regions with social unrest, such as Chile or Peru.
Additionally, the mine’s desert location lends itself to eco-friendly mining techniques. Both the underground and open pit mines utilize dry filtered taping with efficient waste and water management, the company said. Nevada Company is also pursuing a decarbonization program for the open pit project targeting fleet electrification and solar power.
The company’s first sustainability report is set to be compiled based on its 2022 performance.
Contact the author at emily.jarvie@proactiveinvestors.com
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