Tiger Resources’ Kipoi copper mine on the central part of the Katanga Copper Belt
Exhibit one for the prosecutors of this case would be copper companies heading to Chile versus the Democratic Republic of Congo.
While both places have lots of copper, Chile is never anywhere other than at the “good” end of sovereign risk lists, and the DRC the opposite.
A not insignificant list of juniors listed on the Australian Securities Exchange has headed to both countries in the past 10 years or so. And ironically, when it comes to actual success on the ground, the DRC seems to win hands down.
Anvil, Tiger and Mawson West have all got mines up and running, while on the other side of the ledger it’s all a bit bare.
Tamaya Resources was one ASX junior that became a producer in Chile last decade, though it was a tad marginal and eventually it all fell over in a heap, while micro-cap Metallum is currently alluding to very small-scale production.
Hot Chili and Metminco have been working for five or so years to get their respective projects up and running in Chile, but both still seem some years off taking the big step into production. Ditto for the likes of Canadian company Capstone Mining, whose Santo Domingo project may come into production in 2020 after being discovered in 2005.
The oft-cited pluses for somewhere such as Chile as far as promoters are concerned is the presence of copper in an established, notionally low sovereign-risk mining country. It’s ‘promoting 101’, so to speak. The problem is the locals aren’t just going to give away anything that’s much good to an outsider without fully extracting their pound of flesh.
So it would seem that Metminco is having access problems, while Hot Chili will likely have to give up plenty if it wants the key infrastructure and rights it requires for its development – which to be fair can be compared to the iron ore situation the subsequently highly successful BC Iron faced in Australia with rail owner FMG in the iron ore space.
Meanwhile, over the Andes and across the South Atlantic to where chaos often reigns supreme in the DRC, juniors do appear to have a better track record of exploring, developing and mining in a reasonable timeframe.
Mawson West, which though listed in Canada is effectively an Australian junior, hasn’t exactly set the world on fire with its efforts to date in the DRC, but it does have a significant second chance with a different project in the African country.
Tiger too has had its negative moments but could be expected to come good in the next year or so.
Anvil remains the poster child of success in the DRC, eventually being acquired a few years back by Chinese company Minmetals for more than C$1.3 billion.
While there is nothing definitive to be concluded, is it somehow the case that the chaos and headline difficulties of the DRC seem to offer better opportunity for success then the order and well established mining culture of a place such as Chile?
Obvious points to be made include the high-grade deposits in the copperbelt of the DRC mean lower capital versus the low-grade porphyries of Chile requiring high tonnage, high capital operations for similar output – be it significant output so far as a junior is concerned, or significant output so far as a major is concerned.
Defenders of Chile could also easily counter-argue that there have a number of high-profile cases over the years where Western companies have been left high and dry in the DRC, with First Quantum an obvious example.
Perhaps the DRC offers more of a sweet-spot for the junior-to-mid size developer, and Chile more security for the mid-size and major type companies.
Meanwhile, proof that even today there remains appetite for promising projects in the DRC can be seen with tiny little Regal Resources and its announcement last week it was raising, at a significant share price premium, US$6.3 million to progress feasibility work on its Kalongwe project in the DRC.
That’s perhaps worth repeating: a micro-cap in the current environment raising significant equity at a significant premium – for work in DRC!
What value sovereign risk, then?