Cyprium Metals propels Nifty reopening as huge copper shortfall forecast
By 2030, according to Norwegian research firm Rystad Energy, the world will face a severe shortage of copper, with demand exceeding supply by 6 million tonnes a year.
Copper demand will see a 16% increase in consumption over the next eight years, propelled by the global dynamic of electrification.
About 75% of the mined copper is used in electrical wires, electrical networks and motherboards.
At the same time, copper discoveries and mining developments have lagged.
New life for a major Australian copper mine
Enter Cyprium Metals (ASX:CYM) and its copper projects in Western Australia.
And in particular, the Nifty copper mine, located at the western end of the great sand desert in the northeast Pilbara region – about 350 km from Port Hedland.
It contains a resource of 658,000 tonnes of contained copper.
The mine has a long history. The deposit was discovered in 1981 by the former WMC, with drilling in 1983 of the oxide resource leading to the discovery of the deeper sulphide body.
Ten years later, WMC commenced an open pit heap leach operation, exploiting the relatively high grade oxide resource.
In 1998, the mine was bought by the former Straits Resources, this company increasing its production.
Another owner arrived in 2003: the Indian company Aditya Birla Minerals, which began underground development in 2004 to access the sulphide resource.
This company was taken over in 2016 by Metals X (ASX: MLX).
Mine life will be extended to 11 years
Now it’s in the hands of Cyprium.
In a recent client note on the company, Evolution Capital described its Nifty project as having “a checkered past with various owners and a tricky underground mine plan.”
He noted that Cyprium’s strategy of focusing on surface mining oxide ore, and later sulphide ore, is much less risky than previous efforts.
The oxide project is planned as the first stepping stone, with a production of 25,000 tpa of copper cathode.
The revenue thus generated will allow the company to refurbish the sulphide concentrator to extend the life of the mine to 11 years with an average of 23,000 tpy of copper payable in concentrate.
Costs much lower than current price
The Cyprium Restart Study was based on a copper price of $4.50/lb (AUD6.40/lb), with a direct cash cost of $1.91/lb (AUD2.72/lb ) and a fully allocated cost of $2.82/lb ($4.01/kg).
Even with the recent drop in the price of copper, Friday’s close at US$4.26/lb (A$6.06/lb) still leaves a comfortable margin.
In its latest quarterly report, Cyprium noted that it was speaking to potential financiers who are reviewing the study and the company’s final data.
The project is expected to generate free cash flow of $544 million and a payback period of three years.
Other ongoing copper projects
Besides Nifty, Cyprium owns 100% of the Maroochydore copper project which has a resource of 48.8Mt at 1% copper, for a metal content of 486,000t.
There is also the Murchison copper project which includes the Holland resource of 2.8 Mt at 1.9% copper, with a content of 51,500 t as well as 28,000 ounces of gold and 500,000 ounces of silver.
While the price of copper has fallen in recent weeks, closing at US$9,414/t (A$13,398/t) on Friday – and falling below US$9,500/t (A$13,520/t) for the first time in 2022 – some analysts see this as a temporary setback.
Chinese demand should rebound
A reduction in demand from German industries was the latest setback for the price of copper, coming on top of COVID-19 lockdowns in China, a country that consumes around 55% of the world’s copper.
In a report this morning, however, Commonwealth Bank (ASX:CBA) commodities analyst Vivek Dhar said he expects copper to gain support later this year.
About 21% of copper goes to power grids, and these expand to reach new renewable energy generators that need to be connected to the grids.
The CBA expects Chinese demand to recover somewhat in the second half of 2022.