The Canadian-born mining engineer and metallurgist knows a thing or two about copper, having built the original Colluhuasi copper mine in Chile, the world’s second largest copper mine.

Caravel’s namesake copper project is large, but low-grade, and is just 150km north of Perth.

Hyma said there was no doubt the copper industry was in transition.

He pointed to the declining grades of large copper projects, including BHP’s Escondida mine in Chile, the world’s largest producer.

Escondida’s grade has declined from 1.7% in 2007 to just 0.5% today.

“Grade is not king – grade has been declining for the past 30 years to a point where the average grade of all the major producers is now only 0.7%,” Hyma told RRS.

“On a worldwide basis, reserve grades have now fallen to 0.4%. The reality is that this is going to continue and so, let’s get used to it.”

Hyma said while grade has been dropping, the rate of new copper discoveries had plummeted.

“Big deposits are becoming very hard to find and that’s despite billions of dollars of exploration spend over the past 20 years,” he said.

“The probability of finding another Escondida or a Colluhuasi or a Kamoa is very low, and if it is discovered, that timeline to development is about 15 years.”

Global copper consumption is around 25 million tonnes per year but is forecast to grow to 40Mtpa by 2035.

Hyma said a structural deficit in copper was emerging.

“That’s a 60% increase in the next decade but if we factor in the lack of new discoveries and their probability of actually coming into production, we think that supply gap could be as much as 10Mt as early as 2026 – that’s only two years from now,” he said.

“Even if half of that demand comes true, the industry is still going to be in deficit.”

Copper M&A heating up

Hyma said the combined effect of falling grades and a lack of new discoveries were leading to an uptick in copper merger and acquisition activity.

In July, BHP and Lundin Mining made a joint bid for explorer Filo Corp, a deal which also involved BHP paying US$690 million for a 50% stake in Lundin’s Josemaria copper project in Argentina.

Josemaria is in construction and is expected to produce around 131,000t per annum of copper over at least 19 years.

“BHP is very smart,” said Hyma. “They’re buying into that to secure copper units of known discoveries and that’s the trend we’re seeing in M&A.”

On Wednesday, Bloomberg reported that Chile’s Codelco made a US$500 million offer to buy 10% of Teck Resources’ Quebrada Blanca mine, citing anonymous sources.

Caravel

Hyma said he was attracted to the Caravel project by its location, size and long mine life.

The Caravel copper project has a resource of 3.03 million tonnes of contained copper at 0.24% copper, only a slightly lower grade than Josemaria’s 0.3% copper.

It also contains 1 million ounces of gold, 46Moz of silver and 60,000t of molybdenum, the latter of which Hyma said was also attracting value.

Canaccord Genuity has touted Caravel as one of the largest undeveloped copper projects in Australia.

“In global terms, the resource places Caravel in the top 20 active development projects, held outside the majors,” analyst Paul Howard said earlier this year.

Based on a 2020 prefeasibility study, the project has pre-production capital costs of A$1.67 billion, including A$1.16 billion for the 30Mt per annum plant.

Caravel would produce around 65,000tpa of copper at all-in sustaining costs of US$2.07 per pound over a mine life of at least 25 years.

Using a US$4/lb copper price, the project has a pre-tax net present value of A$2 billion.

The company is working on a feasibility study.

There’s only around a dozen copper projects with contained copper of more than 1Mt globally at feasibility study stage, according to Hyma.

Hyma said most had grades of 0.25-0.4% copper and few were in tier one jurisdictions.

“In fact, at Caravel, we can make money at a cut-off grade of 0.1%,” he said.

He added that Caravel’s feasibility study would demonstrate that the project could be profitable.

“We think that Caravel with 3Mt of JORC-compliant defined metal in the resource and reserve represents a real opportunity as we progress through the feasibility study,” Hyma said.

“We’re rapidly moving towards development – we plan to build this project.

“The Caravel copper project is one we believe must and will be built to meet world copper demand.”