The most valuable objects in the world all have one thing in common – scarcity.
Such a reality is especially applicable to whatever society values the most. For most people, this conjures up images of luxury goods like large diamonds, vintage wines, and even mountain-top mansions.
However, the last several decades have also revealed an increasingly stark scarcity of certain commodities that human-kind actually relies upon. Near the top of that list is copper.
In fact, the discovery of so few new world-class copper deposits across the globe in recent years has become a serious concern for the mining industry. So much so that Canadian companies have gone as far afield as Mongolia in order to unearth a new multi-billion-dollar copper asset.
More so than ever before, there is a dire need bring onstream more world-class, high-grade copper deposits due to the arrival of the green energy revolution, which is highly reliant on industrial copper.
This is why the term “scarcity value” takes on a heightened significance when applied to
Kodiak Copper Corp (TSX.V: KDK) (OTC: KDKCF). The small Vancouver-based explorer/developer has made potentially one of the most prolifically-sized, high-grade copper discoveries in North America in recent memory.
Furthermore, the latest round of drill results at Kodiak’s MPD copper-gold project in southern British Columbia continues to validate the thesis that a world-class mineral asset may continue to prove itself out with addition drilling—of which there will be plenty to look forward to in 2021.
The highlights of the most-recently announced drill results from the last five holes of the drill program from the Gate Zone discovery made in 2020 are as follows: 213 m of 0.65% Copper and 0.37 g/t Gold (1.00% CuEq) and 171 m of 0.62% Copper and 0.43 g/t Gold (1.03% CuEq). As an aside, CuEq refers to copper enriched with precious metals (in this case gold) co-existing in the host rock.
These results compare favourably with the first round of drill results – ones that revealed very high combined copper-gold grades in especially thick mineralized intersections.
Additionally, Hole #10 was a 290-metre step-out to the west of all the previous drilling at the Gate zone. It successfully intersected the same mineralised system, while also exhibiting the same style of high-grade copper-gold. This speaks to the untapped potential of the Southern extension of the Gate Zone some of the large anomalies on the MPD ground.
To date, Kodiak has only drilled just over 100m of a 1km target that is defined by a copper-in-soil anomaly. The underlying geophysical anomaly is even larger, it is 3km long. Drilling Gate further is the company’s next priority, then in other prospective zones such as Dillard and Dillard East. This is where extensive geophysical surveying has revealed large regional magnetic lows that correlate with overlapping geochemical (copper-in-soil) samples and historic drilling too.
Accordingly, Kodiak is fully funded (with $14 million in the treasury) for up to 30,000 metres of drilling throughout 2021. This should go a long way towards outlining the lateral and vertical parameters of this prospectively large tonnage, high-grade mineral asset at MPD.
Outshining the Competition
Notably, the grades encountered in a high-grade porphyry centre are almost triple those that are mined at the other copper giants in Canada. Keep this in mind: most porphyries have high grade centres surrounded by a larger envelope of lower grades. It is the combination of these two dynamics that typically makes for a viable deposit.
The best intercepts to date, which were encountered during the first five deep drill holes, consisted of 535 m of 0.49 % Cu and 0.29 g/t Au (0.76% CuEq) including 282 m of 0.70% Cu and 0.49 g/t Au (1.16% CuEq), including 45.7 m of 1.41% Cu and 1.46 g/t Au (2.75% CuEq)*.
These grades completely outshine those of the nearby copper-gold mines. They include Copper Mountain, currently mining with reserve grades at 0.24% Cu, as well as Mount Milligan at 0.23% Cu, Highland Valley at 0.31% Cu, Mt Polley at 0.34% Cu, and Red Chris 0.36% Cu.
Collectively, these Canadian copper-gold mines average 0.35% Cu, while copper mines in the USA average a very comparable grade of 0.33% Cu. In spite of their relatively modest grades, some of BC’s copper mines rank as world-class operations due to their large tonnage and operational efficiencies.
The Gate discovery’s stellar drill results also outshine the average grade for the rest of the world’s copper mines, which is only 0.59% Cu.
Moreover, high-grade deposits have become especially rare. In fact, only four world-class copper deposits – consisting of over one billion tonnes grading 1% copper or better – have been found since the turn of the new millennium.
By way of a little perspective, the pipeline of new copper projects is the lowest in a century, according to Mining.com. Yet the paradox is that more copper will be required in the next 25 years than was consumed in the last 500 years, according to industry experts.
Why 2020’s Drilling Delivered a Big Breakthrough
Last year, Kodiak enjoyed the breakthrough success of making a high-grade discovery at the Gate Zone via its inaugural drill program. It involved 6,698 metres of drilling over 10 holes at the Gate zone. This exploratory drilling tested this expansive property to depths below 200 metres for the first time ever. In so doing, Kodiak came up trumps.
The discovery at the Gate zone revealed a deep-seated high-grade copper-gold structure within a significantly enriched, much wider mineralized envelope. In fact, significant mineralization was encountered over substantial widths in all 2020 holes, and to depths of 800 metres.
It bears repeating that among the first five holes, the best intercept consisted of 535 m of 0.49 % Cu and 0.29 g/t Au (0.76% CuEq) including 282 m of 0.70% Cu and 0.49 g/t Au (1.16% CuEq), including 45.7 m of 1.41% Cu and 1.46 g/t Au (2.75% CuEq)*.
It should also be kept in mind that only 125 metes of the approximately one-kilometre-long copper-in-soil anomaly at the Gate Zone has been drilled to date.
To put this discovery into perspective, drilling so far has yielded some of the best early-stage copper-gold intervals ever reported in the rich mining district in which MPD is ideally located.
Ultimately, Kodiak’s drill-bit-driven success last year was rewarded with an investment of CDN $8 million by mining giant Teck Resources, which became a 9.9% shareholder in the process. This backing by a leading copper miner represents a resounding early-stage validation of the MPD Project.
The Big Picture
A prospective mine at MPD may be worth around US $673 million, according to Cormark Securities capital markets mining analyst Stefan Ioannou. This is based on an assumed 300-million-tonne open pit mine with an annual output of 131 million pounds of CuEq.
A projected mine life of at least 19 years is also envisioned by Cormark. These rosy predictions are predicated on such impressive results as the first five drill holes.
As an illustration of the monetary appeal of such deposits, Australian miner Newcrest paid a staggering US$ 840 million to acquire a 70% interest in the Red Chris mine in Northern BC in 2019. Another strong selling point for miners and end users alike is that these mines are located in one of the safest, most politically stable mining jurisdictions in the world.
Indeed, MPD also benefits from such key de-risking political dynamics. And it stands to benefit from the cost-cutting synergies of being in the same copper-gold belt as the nearby Copper Mountain, Highland Valley, and New Afton mines. This provides the assurance of plenty of robust regional infrastructure, a skilled labour force, and mining-friendly communities.
Investment Summary
From a miner’s perspective, the key to the appeal of MPD is the revelation of high-grade drill results over wide intercepts. This speaks to the prospect of a world-class discovery taking shape. This is why Teck Corp. decided to buy a 9.99% stake in Kodiak’s bright future at MPD. It is no coincidence that Teck owns the nearby Highland Valley mine and no doubt sees considerable potential in MPD to emulate the kind of success that this flagship asset has enjoyed.
However, what’s equally compelling is the fact that the Gate Zone is a very rare “home-grown”, high-grade discovery that truly promises to put MPD on the map. Accordingly, the project’s scarcity value is likely to become even more pronounced in a new super-cycle for copper prices – one that is being powered by the green energy revolution, especially thanks to China’s $700 billion stimulus package for massive “green” infrastructure and urbanization projects.
Irrespective of these very favourable long-term supply-demand dynamics, the company is very much in control of its own destiny. And continued drilling success during the company’s large-scale 30,000-metre drill program would no doubt ensure Kodiak’s status as a resounding success story in the making.
On a technical note, the company maintains a tight share structure consisting of 44.8 million shares outstanding (51.8 million fully diluted). When matched with a steady flow of upbeat news, such a scenario typically acts as a powerful catalyst to higher share price valuations.
Again, the likelihood of strong news flow is very good in 2021. After all, there remains considerable ‘blue sky” discovery potential that has yet to be unlocked at MPD – particularly at Dillard and Dillard East.
In a recent news release, company CEO and President Claudia Tornquist expressed plenty of enthusiasm for 2021’s exploration season, saying: “Against the backdrop of the strongest copper market in a decade, Kodiak is well positioned to make 2021 its most active and exciting year yet.”
She added: “With strong economic growth from China, massive global infrastructure stimulus packages and mega trends like electrification and green energy, the fundamentals for copper demand have never looked stronger. Paired with supply disruptions, record-low inventory levels and a lack of new mines and development projects, this creates a perfect scenario for strong copper prices”.
Keep a close eye on Kodiak Copper. 2021 promises to be a banner developmental year that should set the company on a trajectory to higher share price multiples.
ABOUT THE AUTHOR: Marc Davis has a deep background in the capital markets spanning 30 years, having mostly worked as an analyst and stock market commentator. He is also a longstanding financial journalist. Over the years, his articles have appeared in dozens of digital publications worldwide. They include USA Today, CBS Money Watch, The Times (UK), Investors’ Business Daily, the Financial Post, Reuters, National Post, Google News, Barron’s, China Daily, Huffington Post, AOL, City A.M. (London), Bloomberg, WallStreetOnline.de (Germany) and the Independent (UK). He has also appeared in business interviews on the BBC, CBC, and SKY TV. An enthusiastic shareholder of Kodiak Copper, his opinions are therefore biased and should not be relied upon for making investment decisions.
FULL DISCLOSURE: Kodiak Copper Corp. is a client of Stockhouse Publishing.