Barry FitzGerald: Could this be copper’s next monster? One junior explorer is closing in
Record copper prices, tightening supply and a fresh porphyry hit in Peru have put AusQuest on Garimpeiro’s radar.
“Garimpeiro” columnist Barry FitzGerald has covered the resources industry for 35 years. Now he’s sharing the benefits of his experience with Stockhead readers.
There’s never been a better time for junior copper explorers to be having a crack at making a big-time discovery.
That the copper price is up by 27% to $US4.97/lb on its starting point for the year says as much.
Copper’s run up to record price territory is due to the big thematic in the metal – there is no global electrification and AI without the red metal – combining with industry supply pressures to push price expectations higher.
It was the thematic behind BHP (ASX:BHP) last week making a third takeover bid for the $US44 billion Anglo American to snare its Latin American copper mines. BHP failed again but the exercise said a lot about where it believes the copper market is headed.
Investors too are all over the thematic, with copper producer stocks now commanding premium valuations.
There has been little rub off on the junior explorers from the bull copper market. Fair enough, they are not producing so can’t cash in on copper’s advance into record territory.
But it could be said that their leverage to exploration success is now more extreme than ever, which goes to the opening comment that there has never been a better time for the junior copper explorers.
Junior explorers primed for a breakout
With that in mind Garimpeiro went looking in the junior copper space during the week for companies with the potential to fire up investors in coming months on the back of exploration success at projects with large-scale potential.
AusQuest (ASX:AQD) was one that fit the bill.
Garimpeiro mentioned AusQuest in November last year when it was trading at all of 0.8c a share for a market cap of $9 million.
It is now trading at 4.9c a share for a $68m market cap (Euroz Hartleys has a 9.5c price target on the stock) in response to its Cangallo porphyry copper-gold discovery in January.
The 100% owned virgin discovery in southern Peru’s coastal copper belt is shaping up as a typically large and low-grade copper-gold system.
It is in the same district as a bunch of typically low-grade but large-scale porphyry-type copper deposits that the mining world wants thanks to their ability to deliver multi-decade large-scale operations in the bottom half of the cost curve.
And it has an advantage over the region’s remote and high-altitude copper projects as it is only 8km from the coast and 25km east of the fishing and mining town of Chala.
Cangallo drilling could define a major porphyry system
But first AusQuest has to pin down the size and grade of Cangallo.
Whether it shapes up to be something approaching or as big as the porphyry copper deposit that now underpins Anglo American’s 300,000tpa Quellaveco mine in the same region remains to be seen.
The company is having a crack at finding out anyway. Assay results from two recently completed diamond holes in the northern part of the project are due next month. Based on visual inspection, the drilling more than doubled the known depth extent of the mineralisation to more than 800m.
The real near-term excitement, though, will be results from a reverse circulation program designed to expand the copper and gold mineralisation to the south. It is where surface sampling and geophysical work suggests the centre of the porphyry system sits.
Assay results are expected early in the new year. It could be transformational stuff as apart from expanding the large-scale copper and gold mineralisation, finding the centre of the porphyry comes with the expectation of higher copper grades.
The views, information, or opinions expressed in this article are solely those of the columnist and do not represent the views of Stockhead. Stockhead does not provide, endorse or otherwise assume responsibility for any financial product advice contained in this article.
Originally published as Barry FitzGerald: Could this be copper’s next monster? One junior explorer is closing in
