The deal gives it 15% of Surge Copper at a time when copper prices are trending higher. From Moneyweb.
African Rainbow Minerals (ARM) has agreed to acquire 15% of Toronto-listed exploration company Surge Copper for C$3.8 million (R52.5 million).
While not a particularly large investment for ARM, it gives it a solid foot in the door at one of the more exciting North American copper projects at a time when analysts are forecasting a copper price above $10 000 a tonne by the end of 2024.
This also gives ARM a stake in a long-life North American operation, an important diversification outside of its SA home base.
The deal comes just a month after Surge Copper announced promising exploration results at its Berg property in Canada’s British Columbia, where results show significant deposits of copper in association with molybdenum, gold, and silver – metals which are critical inputs to the low-carbon economy and electrification.
ARM’s wholly-owned subsidiary ARM Copper will subscribe for 39.6 million common shares at an 18% premium to the market price.
This deal is by way of a private placement, leaving ARM with 15% of Surge.
One of the plums in Surge’s exploration portfolio is the Berg project in British Columbia, where a preliminary economic assessment establishes a net present value (discounted at 8%) of C$2.1 billion (R29 billion) and an internal rate of return of 20% based on long-term commodity prices of US$4/lb copper, US$15/lb molybdenum, US$23/oz silver, and US$1 800/oz gold.
The Berg forms part of Surge’s 125 499 hectare contiguous land package in British Columbia, and is estimated to have a 30-year life of mine with total payable production of 2.6 million tonnes (Mt) of copper equivalent, including 1.7Mt of copper.
The resource is estimated hold around one billion tonnes of 0.23% copper, 0.03% molybdenum, 4.6 grams a tonne (g/t) silver, and 0.02 g/t gold.
The Berg property comprises nearly 350 square kilometres of land adjacent to Surge’s existing mineral claims in British Columbia.
Porphyry deposits are an important resource of copper, as well as gold and molybdenum.
Surge also owns 100% the 72 710 hectare Ootsa project in British Columbia which is at an advanced stage of exploration, with an estimated resource of 438Mt at 0.18% copper and 0.32% copper equivalent.
Copper prices have been plagued by supply disruptions and excess inventory, with Anglo American announcing it would cut production for 2024 from 1Mt to between 730 000 and 790 000 tonnes, citing low grades and high production costs.
Copper’s crucial role in the low carbon economy has prompted renewed interest in long-life, easy-to-mine and relatively low cost resources, which makes the Surge acquisition attractive for ARM.
Banking group ANZ recently noted that the cash costs of producing copper had risen in excess of 30% over the last three years to $5 600/t. Inventory supplies have diminished in recent months, prompting ANZ to push its forecasted copper price to north of $10 000/t over the next 12 months.
