Copper is the third most widely used metal on the planet. It has a deep history with the advancement of civilization and essentially was the driving force behind the Bronze Age. For almost 10,000 years humanity has utilized Cu’s properties for a wide array of purposes from creating currency to modern semiconductors. Plumbing components including taps, valves and water pipes; copper radiators, motors, brakes and bearings; copper is an integral part of our everyday life. It is therefore not surprising that there is approximately 50 pounds of copper in nearly every mid-sized car.
Prices were moderate until China pulled the trigger on major development projects in an effort to update the country to enter the world market as a controlling influence. This move, combined with other emerging economies upgrading their infrastructure, sent copper prices through the roof and with the exception of one calamitous dip during the climax of the latest global financial crisis, prices for the base metal came close to US$4.50 per pound in 2011. Then everything went south with commodities as global economic growth took a colossal hit. Now copper is a shadow of its former self, sitting at about $2.15 per pound.
It’s a different world for those involved in copper production. We have a significant supply surplus that is expected to last through to 2018. Depressed pricing combined with declining head grades have made most new project development cost prohibitive and many currently producing mines have been put on Care and Maintenance.
However, this lack of development and the shuttering of active mines will most likely result in a copper shortage by 2020 and with China’s economy continuing to plod forward, even if it isn’t at the breakneck speeds we saw between 2005 and 2014, demand could drive copper prices back up to pre-2012 levels. Smart juniors like Coro Mining (TSX: COP, Forum) have used this downturn to methodically build a portfolio of low-cost copper assets that could produce with a profitable margin even at today’s prices.
Vancouver-based Coro Mining has focused its efforts on project opportunities in Chile. Executive VP and Director, Michael Philpot, explained, “Chile is the world’s largest copper producer. So if you like elephants you should go to elephant country. I know Chile, I’ve worked in Chile and I’ve sold assets in Chile. My partner lived in Chile for eight or nine years and as a result, knows it inside and out. All of our backgrounds are in copper. I’m one of the founders of First Quantum Minerals. Chile and copper are a perfect fit for Coro.”
This isn’t just talk; Coro has been active in Chile since its foundation in 2005, most recently when it acquired a small, relatively new SXEW plant out of administration back in August 2015. The Nora plant is located five kilometres north of the town of Diego de Almagro in the Chañaral Province of Chile. After refurbishing Nora, the company completed commissioning in February this year and expected to commence production through the processing of further dump material and of higher-grade material trucked from the Berta deposit, located approximately 20 kilometres west of the village of Inca de Oro. Nora is currently producing 3,000 tons of copper cathode per year with the intention of expanding production to 5,000 tons at 100% capacity.
Coro has seen a significant uptick in market valuation over the last three weeks, probably due to the results from the company’s recent 16-hole drill campaign at the Marimaca Project, located 22 kilometres east of the port of Mejillones in the II Region of Chile. All holes intersected substantial copper mineralization highlighted by 150 metres @ 1.13% CuT from surface at hole MAR-10.
Coro’s continuing efforts caught the attention of Greenstone Resources, a private equity fund specializing in the mining and metals sector. With over 80 years combined industry and finance experience throughout its management, Greenstone’s interest in Coro as its pick in Chile is nothing to sneeze at. With 33% interest in Coro, Greenstone has tacitly expressed its confidence in the company, its management and assets.
Speaking of strategic partnerships; Coro has also teamed with ProPipe SA, a Chilean boutique engineering firm with about 150 engineers. Philpot illustrated the benefits of this particular relationship, “If I were to hire a third party to do a study on a proposed pipeline from downtown Vancouver to North Vancouver, I might get one six months later for many hundreds of thousands of dollars. Because of our relationship with ProPipe, I could get that same study in a few days at a fraction of the cost.”
Then he added, “It is a huge positive for our shareholders that we have a completely different type of partner who’s working side-by-side with us to get things done quickly so we don’t have to wait with the rest of the world. Let’s face it, if you go to an engineering firm when things are hot, you’re getting the “D” team or the “E” team if you’re a junior. For us, not only do we get an amazing turnaround, we also get the cream of the crop, because our interests are aligned. It’s a win-win situation.”
Coro is headed by industry veterans with the necessary know-how and regional experience to take the company into production. President and CEO, Alan Stephens was the ex-VP of First Quantum and International Exploration Manager for Cyprus Amax Minerals. As such, he has a laundry list of discoveries to his name. Unlike many geologists, Stephens has a keen understanding of the business of mining to balance out his technical expertise.
VP of Development, Marcelo Cortes, is on the ground in Chile running the company’s day-to-day operations. He is another industry veteran having worked for such giants as Antofagasta Minerals. The company’s VP of Exploration, Sergio Rivera, a Chilean with 32 years of exploration and numerous discoveries under his belt, also served as the General Manager of Exploration for a wholly-owned subsidiary of Codelco, the world’s largest copper producer.
This is a perfect time for companies like Coro. Copper has bottomed out, the mining industry is operating at bargain prices and copper producing jurisdictions like Chile are friendlier than ever to miners wishing to do business. Philpot commented, “You can buy equipment cheaper. Let’s say you’re buying sulphuric acid for your leaching operation at $110/t; now you’re going to get it at $60/t. Wages have also come down in dollar terms due to Chilean peso weakness. So it’s a fantastic time to be doing this…if you have the money.”
To further illustrate the state of the union for copper miners, all the major copper deposits in the world that have engineering reports on them are in hibernation right now. They won’t come out of hibernation until copper pops over $3.00 per pound. When they do “wake up”, the engineering needs to be updated, all their social work programs need to be updated, the environmental work needs to be updated and management decisions have to be updated. This will result for a slow turnaround for company’s resurrecting sleepy projects, creating opportunities for companies like Coro.
Let’s go back to money for a second. Coro is no different than any other junior in this regard; it needs cash to fund its development efforts and corporate needs. However unlike many juniors, Coro has “currency”, so it has something tangible to sell when it seeks financing from its shareholders and third-party sources. Any proceeds from upcoming financing rounds will go to buy down Coro’s convertible debenture debt, provide working capital to expand Nora from 3,000 ton to 5,000 ton production levels and to aggressively advance Marimaca to resource status.
Greenstone’s 33% stake combined with management’s and major shareholders 33% interest, makes Coro Mining a tightly-held entity with a healthy dash of share liquidity. One thing to note: since 2007 when Coro went public, the insiders have held onto the majority of their interest in the company.
Coro has big goals as Philpot explained, “In five years, I’d like us to be operating at 30,000 tons of copper plus of SXEW copper cathode. With what we have in the company today, that is attainable. This isn’t a wish list that we have to go find something more or do another deal. Our story already has everything necessary to advance this goal.”
Companies grow from their base, using their strengths. Coro has the best of both of these elements with top-quality assets, prime mining jurisdiction, expert management and technical support, and a defined path to production. Smart investors would be wise to keep this one on their radar as commodities make their comeback. However, don’t take my word for it. As always, do your due diligence before making any investment decision.
--Gaalen Engen
https://twitter.com/gaalenengen
FULL DISCLOSURE: Coro Mining is a Stockhouse Publishing client.