Analysis: Abandoned copper mines embraced as fast track to boost output

Chibougamau Independent Mines

30/10/2024 16:57

By Divya Rajagopal
       TORONTO, Oct 30 (Reuters) - 
    In the race to secure copper for the clean energy transition
and artificial intelligence applications, a range of companies
are firing up abandoned assets once seen as financial
liabilities to fast-track significant volumes of supply.
  
        The call for copper is poised to surge in coming years
due to its role in electric vehicles, renewable energy and data
centers for artificial intelligence. Demand is expected to
outstrip supply by 
    1.7%
     in 2035, and copper prices have scaled record highs this
year.
  
        So companies are looking to revitalize older mines. 
  
        Typically, it takes at least 10 years and as much as $5
billion to build a copper mine from scratch. Once companies
raise capital there are other challenges. Local communities have
opposed mining projects from 
    Panama
     to 
    Serbia
    .
  
        A Reuters analysis of at least four shuttered copper
mines in the process of being restarted shows their owners
trying to open a speedier pathway to supply around 7 million
metric tons of metal in the next five years, adding to 30
million tons of output expected by 2031. 
  
        Rehabilitating old mines "taps into investor sentiment
that it is going to be easier, and it is easier," said Daniel
Bornstein, a partner at McCarthy Tetrault which has advised
miners on rehabilitation.
  
        One example: Selkirk First Nation in Canada’s Yukon
Territory this year took over a mine in Yukon, Canada that was
shuttered by Minto Metals last year. It had produced 226,000
tons of copper but shut after being declared bankrupt.
  
        The Minto mine is among the first mines in Canadian
history to be bought by an Indigenous group. Details of reviving
it with help from external operators are still being worked out
in negotiations with creditors. The mine needs two years of work
for production to start, court documents showed. 
  
    In Canada's Quebec province, Doré Copper Mining  DCMC.V ,
acquired by Australia's Cygnus Metals  CY5.AX , is reopening a
site that has been dormant since 2008. In Spain, Denarius Metals
 DMET.NLB  is rehabilitating its Aguablanca mine after a
seven-year hiatus.
    Nevada Copper Corp  NEVDQ.PK , taken over by private equity
firm Kinterra Capital in August, is ready to restart its Pumpkin
Hollow underground mine after it emerged from Chapter 11
bankruptcy protection this year. 
    Nevada Copper operates both underground and open-pit mining.
It changed hands several times as investors jumped in to unlock
its open pit potential after feasibility studies pointed to
higher ore grade material.  
    "We see long-term value in the open pit project. And once we
do the institutional work and develop project financing for it,
we think major mining companies will be interested in buying the
project from us," said Kamal Toor, co-managing partner at
Kinterra Capital. 
    Total volume at Nevada Copper is estimated at 3.5 million
tons. The underground mine is essentially a restart, Kinterra
co-managing partner Cheryl Brandon said, adding the open pit
operation could be producing by the second half of this decade,
ranking among the biggest in the U.S.
    Doré's Chibougamau mine in Quebec operated from the 1950s
until it closed in 2008. In 2019, new owners took the company
public as copper prices surged. It has the highest grade of
copper in North America, said Ernest Mast, Doré's chief
executive who had been leading the now-disputed Cobre Panama
mine before it was taken over by First Quantum Minerals
 FM.TO . 
    With a capital cost of C$180 million ($133.26 million),
Chibougamau is one of the lowest-cost projects, Mast said. The
company expects to start production by 2027.
    Denarius, a Toronto-based junior miner with assets in Spain
and Colombia, cited surging global prices for the decision to
revive its Aguablanca nickel-copper operation. Lundin Group
shuttered it in 2016 when nickel prices collapsed. 
    "Mines don't disappear; our mine in Spain has operated since
the Roman times," Denarius Chief Executive Serafino Iacono said.
"What changed was the price of the commodity." 
    Denarius has an initial nickel and copper concentrate output
target of 90 tons by the end of next year, Iacono added.
    Denarius has signed Trafigura and Boliden  BOLMIN.UL  as
off-take partners, betting on a target price of $1,750 tonne for
nickel and $10,000 tonne for copper. Mine rehabilitation costs
are estimated at C$15 million.
        
  
        CHALLENGES 
  
        Despite surging demand, efforts to renew the mines could
be complicated by issues such as cyclical commodity prices,
smelter charges and availability of skilled labor, said Rob
McLeod, CEO of Nations Royalty, founded by the Nisga'a Nation in
British Columbia. 
    Already, weaker demand from China has led some investors
raise bets on lower prices  CMCU3 . Goldman Sachs slashed its
target copper prices recently to $10,500 a ton from $15,000
previously. 
        Producers face the challenge of timing production to
match desired prices, Doré Copper's Mast said, citing
difficulties around securing finance to finish construction.
    "When you restart an old mine, the belief in the market is
that you can bring this mine on quickly. The reality has been
sometimes different," McCarthy Tetrault's Bornstein said. 
    Even when old permits are in place, governments require
miners to start from scratch, and obtain a full suite of
permitting, he said. He also cited legacy environmental and
social issues associated with abandoned mines built on
Indigenous land.
        Concerns of Indigenous communities are usually "not an
unsurmountable obstacle, but an obstacle that you have to take
into account as it could be more difficult to build a
relationship," Bornstein said.
  
    
      ($1 = 1.3507 Canadian dollars)

 (Reporting by Divya Rajagopal; Editing by Veronica Brown and
David Gregorio)
 ((mailto:divya.rajagopal@thomsonreuters.com;))