Marimaca Poised to Capitalize on Looming Copper Deficit
Hayden Locke, President and CEO of Marimaca Copper Corp. (TSX: MARI), knows a good opportunity when he sees one. “Copper is an amazing place to be in the mid to long-term. I started my career in resources as Chinese growth occurred in the early 2000s, and I saw firsthand how a tailwind can create enormous opportunity that helps build businesses, create shareholder value, and make a huge difference in the world, and this is one of the best commodity tailwinds that we're likely to see this generation.”
Locke is shining a spotlight on a phenomenon that many are quickly coming to realize: Copper is fundamental to the global green transition, and there is a desperate need for new copper production given looming supply deficits that many in the industry are forecasting.
Locke believes his company is uniquely positioned to take advantage of this predicament and help address a vital need. “In a market where few new projects are coming online, we think our Marimaca Copper project has a relatively short timeline to production. That’s significant, given there isn’t much coming online in the next three to five years.”
The Marimaca Copper project is located on prime real estate. Chile is the most important copper producing country in the world, and Antofagasta, where the project resides, is the most important copper producing region in Chile. It has a long track record as a supportive jurisdiction that has nurtured a mature mining industry, home to major players like Rio Tinto and BHP, who are two of the key owners of the renowned Escondida Copper project.
Given the legacy of production in the area, there is a lot of valuable infrastructure already in place, and that bodes well for the Marimaca Copper project. In addition to its proximity to the coast and a transportation port, all of the infrastructure required to build large scale industrial projects is right on its doorstep, including roads, electrical infrastructure, and communications. The last piece of the puzzle, people, can be readily found in the Antofagasta region, where most residents are either employed in the mining industry or some offshoot of it. Together, they constitute an incredibly well educated and experienced workforce.
The ready availability of infrastructure and a valuable human resource is a big reason why Marimaca’s absolute capital costs - the amount of money a company needs to spend to get its first dollar of cash flow - are among the lowest in the industry.
The same can be said about Marimaca’s anticipated capital intensity costs, which measure the per pound or per ton cost of producing copper. In addition to low-cost power and well-established supply chains, this metric benefits from the project’s shallow open pit operation, a very low strip ratio, and good metallurgy, which all help to lower the cost of extraction. “When you account for all of this,” Locke said, “you get an industry leading return on invested capital metrics, which is all important to finance these projects. It also lowers your execution and operation risks, so it’s an exceptional project from that standpoint.”
So far, the project has a resource of about 800,000 tons, 750,000 of which are in the measured and indicated category. Based on these numbers, the expected mine output is 50,000 tons annually with a mine life of 16 years. But as Locke points out, there is potential for significant resource expansion around the project. “While our immediate focus is to build the mine, we did make three new discoveries of shallow oxide mineralization within five kilometers of the project. So, we think this could be a multi-generational undertaking.”
While the ultimate size of the resource is still to be determined, the approach Marimaca is taking to build the mine isn’t. “We’re building the mine of the future,” Locke declared, “that uses an extraction process that’s nearly 40% less carbon intensive than alternative methods.”
Marimaca is also implementing measures to minimize the use of fresh water, a concern in arid regions like Antofagasta, by using recycled seawater instead.
But the real game changer for Marimaca is the recently announced partnership with the Mitsubishi Corp., probably the most important copper investor in Latin America. Mitsubishi is a minority partner in several of the largest copper projects in the region, including Escondida, which is the world's largest copper mine. “They are an incredibly diligent and risk averse organization,” Locke confirmed, “so I think it's a huge endorsement of our project and a validation of all the technical work that we've done. Most importantly, it supports our view that this is a high-quality asset.”
This partnership provides Marimaca access to Mitsubishi’s technical know-how and operational expertise that will make the whole process of transitioning from an explorer to a developer and then a producer a smooth one.
Now that Mitsubishi is on board, Marimaca’s immediate focus will be on permitting and development of the project rather than further exploration. It will also do additional engineering to support future financing discussions with Mitsubishi and potential new partners, as well as the debt financing partners that it depends on. “Marimaca has presented a base case project to the market that we are very confident we can deliver,” Locke said. “Now the focus will be on how to make the project better. How to reduce risk. And how improve the economics of the project from exceptional to near industry leading.”
Assuming all goes well with permitting, which is expected to be completed by early 2025, mine construction could start later that year, with first copper production sometime in 2026.
Currently, Marimaca plans on developing the mine themselves, but as Locke acknowledges, “There's a high degree of interest in this project, so investors will make the decision whether or not to leave production in our hands or give it to someone else.”
Regardless of the direction the company takes, Marimaca is one of the world’s most intriguing copper projects, located in a tier one jurisdiction with industry leading capital and operating cost metrics that can deliver an excellent return on investment. That, says a lot.
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