- Copper is now the dominant revenue-driver at the top end of the global mining space
- It is also accounting for the largest proportion of global development projects and a huge chunk of M&A activity
- There are a bunch of smaller ASX-listed players benefitting from these trends
While the copper space is the place to be for all of the world’s major miners, it’s becoming increasingly lucrative for smaller players.
Research by advisory firm Harbour tracked the world’s top 100 miners by revenue, rather than market capitalisation.
Of a combined US$730bn in revenue, 28.1% was generated by copper across just 22 companies. For context, 39 gold companies accounted for 21.3% of total revenue.
Switzerland-based, ASX-bound Glencore is the world’s largest miner by revenue, ahead of iron ore-dominated Rio Tinto (ASX:RIO) (US$57.6 billion), BHP (ASX:BHP) (US$51.3 billion) and Vale (US$38.4 billion).
However, times are changing. Rio’s half-year results, released last month, showed earnings of its copper division of US$5.7 billion only just behind its iron ore division at US$6.8 billion.
Last week, BHP reported its full-year results with copper making up the higher proportion of earnings for the first time.
It’s not just the big dogs enjoying surging copper earnings.
A week ago, Kantra Copper (ASX:KAN) (formerly known as Hillgrove Resources) reported a 44.4% jump in June half revenue to $115.1 million, while EBITDA nearly tripled to $34.8 million.
The company’s half-year profit rose by an eye-popping 2088% to $19.5 million.
The results were largely a beat on Canaccord Genuity analyst Tim Hoff’s forecasts, and he lifted his price target for the company by 20c to $1.70 with a speculative buy rating.
Kantra’s Kanmantoo copper mine in South Australia hit a run-rate of 1.8 million tonnes per annum and the company recently approved the development of Emily Star as a third underground mining front.
“With no debt and a strengthening balance sheet, [Kantra] has the financial flexibility to fund growth initiatives including Emily Star and Mutooroo from internally generated cashflows, on our estimates,” Hoff said.
Similarly, Queensland producer AIC Mines (ASX:A1M) this week reported a 29% rise in revenue to $245.2 million and a 177% surge in full-year net profit after tax to $41.48 million.
M&A rising
While big-bang copper M&A among the majors gets hearts racing, there’s been an increase in dealing at the smaller end of the market.
Earlier this year, Aeris Resources (ASX:AIS) acquired Peel Mining in a $214 million scrip deal to combine Aeris’ Tritton operations with Peel’s Mallee Bull and Wirlong copper projects in New South Wales’ Cobar Basin.
In June, Larvotto Resources (ASX:LRV) announced the friendly $54 million scrip acquisition of Queensland copper play Hammer Metals.
While it looked like a done deal due to the support of the Hammer board, a few weeks later, Austral Resources (ASX:AR1) swooped in with an offer valuing Hammer at $80.7 million.
Hammer opted to go with Austral and Larvotto didn’t match the higher offer price.
Hammer’s flagship Kalman deposit, which has a resource of 500,000 tonnes of contained copper equivalent, is 60km from Austral’s operating Rocklands plant.
Also in Queensland, Carnaby Resources (ASX:CNB) agreed to a $213 million buy-out by mid-tier producer Evolution Mining (ASX:EVN) late last month.
Ore from Carnaby’s Greater Duchess project will provide handy feed to Evolution’s nearby Ernest Henry copper operation.
This week, Indonesia’s PT Bumi Resources completed the $79.1 million acquisition of Loyal Metals, giving it ownership of the high-grade Highway Reward copper-gold project in Queensland.
The recent dealing likely won’t be the end of it, with a Stockhead piece this week pointing to Breakthrough Minerals (ASX:BTM), owner of 200,000t of CuEq resources in Queensland, as a potential target.
“There’s clearly a land and resource consolidation story developing across Northwest Queensland,” Breakthrough managing director Nigel Broomham told Stockhead.
“Australian quality copper exposure is genuinely rare, and we think Breakthrough gives us exactly that.” BTM hosts resources next door to major Harmony Gold’s Eva project.
At last month’s Noosa Mining Conference, AIC managing director Aaron Colleran spoke of the logic behind his decision to step back to non-executive chairman from October 1.
“I’m not retiring. I won’t be playing golf. I’m getting ready for an M&A frenzy. A disciplined M&A frenzy,” he said.
“We’re looking for opportunistic, logical, value accretive acquisitions, but that’ll be 100% of my focus.”
Money flowing
The excitement in the copper market has also led to improved funding capacity for juniors.
Last week, True North Copper (ASX:TNC) announced it had raised $18 million in what was one of the largest recent equity raises for a junior this quarter.
The offer, which was cornerstoned by Tembo Capital, was upsized from the original $15 million sought due to strong demand.
The company also opened a share purchase plan this week to raise up to a further $2 million.
The funds will be used to make the final $7.5 million payment associated with the acquisition of the Mt Oxide project in Queensland, fund further drilling at Mt Oxide and progress the Cloncurry copper project pre-feasibility study.
This month, the Queensland Government’s Queensland Critical Minerals Fund announced a $20 million investment in the Walford Creek copper-cobalt project, owned by unlisted Aeon Metals.
The funds will be used to progress the project towards a final investment decision.
The investment follows similar investments by the fund in fellow copper plays Austral, Carnaby and copper and gold developer QMines (ASX:QML) .
At Stockhead, we tell it like it is. While Kantra Copper, QMines, Breakthrough Minerals and True North Copper are Stockhead advertisers, they did not sponsor this article.
