On December 12, 2018; junior mining company, Power Ore Inc (TSX: V.PORE, Forum) acquired the Opemiska Copper Mine Complex in Quebec, which was a significant multi-decade copper producer for (former) copper mining giant, Falconbridge. With PORE’s current market cap of less than $2 million, the news should have been sufficient to propel its share price higher.
However, with the price of copper having dipped in recent months, investor sentiment has weakened considerably. This is despite the fact that copper market fundamentals have continued to strengthen. A pair of long-term charts will illustrate this to investors.
[charts courtesy of InfoMine.com]
Current LME copper inventories have plunged to lows not seen since 2008. At that time, those low inventory levels were the catalyst for record copper prices, at one point surging above US$4 per pound. This current disconnect between copper market fundamentals and copper market sentiment spells opportunity for investors. The best way to leverage opportunities in any particular resource sector is through investing in the commodity producers and exploration companies of that sector.
This leads back to Power Ore and its newly-acquired Opemiska Copper Mine Complex. Opemiska includes two past-producing mines, which processed over 23 million tonnes of high-grade ore from 1953 to 1991, at an average grade of 2.4% copper. Along with this, the Mine Complex produced gold as a byproduct, averaging 0.3 g/t Au.
Stockhouse recently asked Power Ore’s CEO, Stephen Stewart to provide investors with more information on the potential of this historic mining complex as well as additional insights on the copper market.
- For investors who are new to Power Ore, please provide some brief background on the Company.
We took Power Ore public in the summer of 2018 with the objective of providing our shareholders direct exposure to metals that are most applicable to the electrification revolution that is underway. More specifically these metals are cobalt, copper and nickel. What we mean by electrification revolution is rapid growth of electric vehicles and renewable energy systems, particularly solar panels and wind turbines which are particularly heavy on copper. Copper is essential for EVs and for connecting electrical systems from points A to B, while cobalt and nickel are the key metal inputs for rechargeable batteries in electric vehicles. Power Ore will focus only on advanced stage assets located in the Abitibi as this is our area of expertise. We feel the Abitibi region in Ontario and Quebec is, pound for pound, the best mining jurisdiction in the world to do business. It just happens to be in our backyard so we will play to our strengths.
- Power Ore was originally formed to capitalize on the Energy Revolution currently taking place across the globe. Most investors associate this Revolution with “battery metals”. But copper is also an important ingredient in this Energy Revolution, isn’t it?
Copper is ‘the’ base metal. Society as we know it wouldn’t exist without it. Copper’s traditional uses are extremely broad and varied but readers should understand that as the developing world grows and gets richer, it will need more copper on the per capita basis. Phones, cars, roads, bridges and buildings all need copper. That’s the traditional usage and it alone is growing. Where we think there’s going to be a new sector of growth for copper is electrification. As the world moves away from fossil fuels in terms of cars and energy production and towards more modern technology such as electric vehicles and renewable power generation and storage, copper will be the most impacted out of any single commodity or metallic element.
- A report commissioned by the International Copper Association forecasts the need for an additional 1.55 million tonnes of copper between now and 2027 – just for electric vehicle demand. With current LME copper inventories having dwindled to just 128,000 tonnes, where will the world get all this extra copper?
This is the perfect time to buy into a copper asset. The market may not agree but a market by its very definition is almost the antithesis of a contrarian. Copper’s price is low yet its forward looking supply-demand fundamentals look very attractive for asset owners. Speaking on a macro metals basis, the world has not been exploring for and developing metals projects at the pace that is required, particularly since 2012. More specific to copper, its supply fundamentals are sensitive due to the mega deposits that have been in production for 50, 60 or even 70 years which are getting old and tired, meaning expensive to operate. Head grades are in significant decline and the capital spending required even just to sustain their outputs is massive. I read that Codelco, the worlds biggest copper miner, is spending over $22 billion by 2022 just to maintain their copper output. That’s running just to stand still. There also hasn’t been any new mega-deposits found, and anything new of significance is in very politically unstable jurisdictions. Again, we feel there’s no better place to do business than in Canada and in particular the Abitibi regions of Ontario and Quebec. If you can delineate an orebody within the Abitibi, it should receive a premium relative to counterparts in much riskier places.
- This leads to Power Ore’s acquisition of the Opemiska Copper Mine Complex. Please provide some general background on this “transformational” new asset.
This is a transformational asset as the Opemiska Copper Mine Complex is far bigger, and in my opinion more valuable, than any other asset we own. While our other assets including the Mann Mine and MacMurchy are valuable, in particular the Mann which has very high grade cobalt and silver grades and historical production, the Opemiska is on another scale in terms of size, knowledge of in situ resources, infrastructure, overall potential value and financial returns. This is a real coup for our shareholders and a situation which I feel the market has yet to realize.
- Opemiska is located in an important mining camp in Quebec. What do investors need to know about this district?
Again, pound for pound Quebec is the best mining jurisdiction in the world. It all starts with its geology. The Abitibi which, geologically speaking, is likely second only to Witwatersrand in South Africa. Mother nature blessed the Abitibi with a vast metal endowment. From there you have a populace and communities who understand mining’s value and appreciate the wealth that it can bring. There is also excellent support coming from the Quebec government in terms of Plan Nord, which is a visionary plan to build the infrastructure that will allow resource projects to come to market and generate jobs and a tax revenue. Additionally, Quebec has a number of funds that are mandated to invest into Quebec resource projects. Lastly, Quebec has one of the most efficient flow through regimes in the world. This results in efficiency in permitting and a lower cost of capital. When you combine that with world-class geology, that makes the worlds best jurisdiction.
- Opemiska has historically been a high-grade copper producer, at both the Springer and Perry mines. Please provide additional details on this previous production.
Falconbridge operated these two mines for over 40 years. They shut down in 1991 when copper was $1 a pound. Cumulatively they pulled out over 23 million tonnes of copper at an average grade of 2.4% with a healthy gold credit of 0.3 grams per tonnes. That’s over a billion pounds of copper and there is plenty more. Fortunately for us we possess Falconbridge’s vast database which has since been digitized, enabling us to determine that a good deal of this mineralization is near surface which is obviously important when evaluating an open pit scenario. The key exercise to reinterpreting it from an underground mine to an open pit is understanding what was taken out and what is left over. Historical cut off grades which correlate to a $1 copper price is important but additionally you need a reliable database which gives you the technical and resource information. I also want to point out that there is the opportunity to build on the copper and gold metals on Opemiska. There is evidence to support that there could be cobalt credits in this style of mineralization as neighbouring properties with the same type of geology have a lot of cobalt correlated with the copper. There are also some gold veins which were largely ignored by Falconbridge which we will be taking a close look at.
- Power Ore acquired more than just the physical assets here. Could you explain to investors what data you acquired in this deal and how this database can expedite Project development?
As we alluded to before, the database is one of the most important aspects for our reinterpretation plans. Falconbridge were top rate operators during their era. For this reason we see their data as being very reliable. We also have confidence in the data because Falconbridge was actually mining and not trying to impress in a news release. If they had poor quality data, then they lost money while mining. The value add now is that this data has been digitized and we are validating the database to bring it under purview of NI 43-101 compliance. The value of this database is incalculable. When any of our counterparts look to define a resource like what Opemiska is, it would cost them many tens of millions of dollars to delineate something to the extent of Opemiska. After all, the end result of drilling is just the collection data.
- For investors doing their due diligence, please outline the terms of the acquisition.
We were able to negotiate a great deal for our shareholders because we aligned our interests with those of the vendors. Part of this process was establishing trust with the vendors who liked the way we do business and value our technical expertise. The pitch to the vendor was to become our partner and a significant shareholder in Power Ore. To become a 100% owner of the Opemiska, the vendor will be issued 8 million shares over 3 and half years. For the cash component of the acquisition $3 million of the $4.5 million goes directly into the ground as an investment in Opemiska for the benefit of all Power Ore shareholders. I will also point out that the acquisition is structured over a 3 1/2 year period which is important from Power Ore’s standpoint. Cost of capital is always one of our primary considerations and time provides us flexibility to find efficient ways to finance this projects development.
- What are Power Ore’s near-term plans for Project development?
The first step is to complete the validation of the database. We have two geologists on this task full-time and expect to be done within a few months. From there, we feel it’s possible to issue a resource estimation however it’s more likely that we’ll look to add to it by drilling of the crown pillar which is a key area of resource expansion. A crown pillar is the top layer of rock which is left in place for an underground mine to prevent collapse. It’s typically about 30 to 35 metres wide and in the case of the Opemiska we know that there is mineralization there and that very little drilling has been done. In the context of an open pit this crown pillar will be an important part of the resource. We’re also going to be spending some time evaluating the wall rock, meaning the areas within the rock that are outside of the vein system. We believe there is a halo effect which holds the potential for economic mineralization. Over and above the crown pillar and wall rock areas for expansion, we will be drilling some blue sky zones as well.
- What is the longer-term strategy for advancing Opemiska toward production?
Broadly speaking our objective is to delineate an economic orebody with clearly defined economics and engineering. Given our current understanding of the Opemiska geology, along with the existing “in place” infrastructure we believe that these reports can be fast tracked.
- Mining investors shouldn’t forget about the Company’s battery metals assets. What are management’s plans to build upon the strong cobalt sampling results from your Mann Mine Project?
Power Ore is a multi-asset company with exposure to copper in the Opemiska but also cobalt and silver with the Mann Mine and nickel with MacMurchy. Mann is advanced stage in that it was a producing mine with recent drilling that confirms high-grade cobalt and silver. It has a ramp that goes down to the 200 foot level directly into mineralization on which we completed geophysics this fall which identified new drill targets. Mann is currently in the drill permitting stage. We also have MacMurchy which is our nickel project. This is our earliest stage project, but it does have good potential given there was a drill intersection of over 7% nickel over a metre. Obviously one drill hole is far from building or defining an economic situation but 7% nickel in the middle of Ontario off the highway is something that’s very interesting to us.
- Please outline your long-term vision for building shareholder value with Power Ore.
Our number one purpose is to make money for our shareholders, end of story. That is what all our shareholders want and so that is management’s mandate. To achieve this we are constantly evaluating our options. Power Ore’s broad plan is to build itself into a significant owner of advanced stage assets within Ontario and Quebec which gives our shareholders exposure to copper, nickel and cobalt. And we look for unique ways in order to achieve this objective. We are a small company which allows us to be both nimble and creative but also forces us to highly selective in the opportunities we choose. In effect we are always looking for problems whose solutions will add value on a per share basis.
www.powerore.com
FULL DISCLOSURE: This is a paid article of Stockhouse Publishing.